Samsung Electronics Executive Chairman Lee Jae-yong exits the Seoul High Court in Seocho District, Monday, after the court acquitted Lee from his alleged involvement in the controversial 2015 merger between Samsung C&T and Cheil Industries. Yonhap
Samsung Electronics Executive Chairman Lee Jae-yong was acquitted in a high court ruling over his alleged involvement in the controversial 2015 merger between Samsung C&T and Cheil Industries, which played a critical role in him gaining control of Korea's largest conglomerate.
In the trial, the Seoul High Court judges upheld a district court ruling that cleared Lee of all 19 charges, including breach of trust and violation of the Financial Investment Services and Capital Markets Act.
Lee was indicted in September 2020 for his alleged involvement in the merger between two Samsung affiliates. Prosecutors suspect that the group committed illegalities to inflate Cheil's value to benefit Lee, which ultimately helped Lee gain control of Korea's largest conglomerate from his father.
In the district court trial in February last year, the Seoul Central District Court cleared Lee of all 19 charges, interpreting that the merger could not be seen solely as a means for him to secure control of the group. The ruling also found no grounds to conclude that the merger ratio was unfair or caused losses to shareholders.
In the appellate trial, the prosecution revised the indictment for the appellate ruling and sought a five-year prison sentence, after reflecting a separate court ruling in August on Samsung Biologics, which was a Cheil subsidiary. At then, the ruling partially acknowledged the financial regulator's claim that the biotech had altered accounting standards to artificially inflate Cheil's valuation.
However, the Seoul High Court noted that prosecutors' charges were "not proven enough to rule out reasonable doubts," adding "criminal punishment cannot be based on speculation and scenarios." Regarding the accounting practice of Samsung Biologics, the high court also said that "it is hard to conclude that there was intentional accounting fraud," adding that "financial authorities can impose administrative measures, but this cannot constitute criminal punishment."
While exiting the court, Lee did not respond to reporters' questions. His legal representative, Kim Yoo-jin, said after the ruling, "Lee hopes to focus on his job on the occasion of the ruling."
The prosecution can appeal the case to the Supreme Court, but legal experts said that chances are slim for the top court to overturn the high court ruling because the Supreme Court only reviews the legal interpretation of rulings by lower courts, not new facts.
Hours after Monday's ruling, the prosecution said in a statement that it will "thoroughly review the high court ruling before deciding whether to file an appeal to the top court."
Kim Yoo-jin, center, lawyer for Samsung Electronics Executive Chairman Lee Jae-yong, speaks to reporter at the Seoul High Court in Seocho District, Monday, after the court acquitted Lee from his alleged involvement in the controversial 2015 merger between Samsung C&T and Cheil Industries. Yonhap
The ruling signals that Lee, who has been struggling with legal risks for over 10 years, may now be freed from uncertainties regarding his future and can focus on addressing corporate issues surrounding Samsung.
In 2016, Lee was mired in a separate political scandal tied to impeached former President Park Geun-hye, leading to his imprisonment on two separate occasions from 2017 to 2018 and again in 2021. Since 2020, he has faced legal battles related to the merger case, attending over 100 hearings in district and high court trials.
Amind Lee's legal struggles, Samsung has been keeping a low profile in making big investments. After acquiring Harman International in 2016, Samsung has not engaged in any big mergers and acquisitions. In 2017, the group also disbanded its Future Strategy Office, the group's top policy-making body coordinating major affairs among affiliates, and Lee himself resigned from Samsung Electronics' board membership in 2019.
At the same time, Samsung has been facing growing calls that it needs to set up a control tower.
Lee has been facing criticism for exercising authority as the head of Samsung Group without bearing the legal responsibility as a board member of Samsung Electronics. Samsung's Compliance Committee also stated in October that Lee needs to return to the Samsung Electronics' board, and the group should rebuild its control tower, including the Future Strategy Office.
Above all, industry officials say Lee's top priority is addressing the growing doubts on Samsung Electronics' prowess as one of the world's biggest tech companies.
Once the world's top memory chip maker, Samsung Electronics' chip division ended up posting an operating profit of 2.9 trillion won ($1.98 billion) for the fourth quarter of 2024, trailing far behind its rival SK hynix with 8.08 trillion won.
Its smartphone and home appliance businesses are also backpedaling amid intensifying competition from Chinese rivals, while the company's business divisions are increasingly separating from each other to undermine cost-competiveness.
Despite calls for sweeping changes to the company's leadership for recovery, Samsung Electronics took a conservative approach in its November leadership reshuffle, which was interpreted as the company's inevitable choice for stability before Lee's ruling.
"Since the prosecution can appeal the case to the Supreme Court, it is too early to jump into a conclusion that Lee is now free of legal risks," a conglomerate official said. "As his lawyer said, however, Monday's ruling provided an opportunity to focus on his job."