Samsung leader named a suspect in South Korea political probe
A South Korean special prosecutor's office will question Samsung
Group [SAGR.UL] leader Jay Y. Lee as a suspect in a widening influence-peddling
scandal that may force President Park Geun-hye from office.Prosecutors have been looking into whether Samsung
payments of about 30 billion won ($25 million) for a business and foundations
backed by Park's friend, Choi Soon-sil, were connected to a 2015 decision by
the national pension fund to back a controversial merger of two group
affiliates.Park could become South Korea's first democratically elected
leader to leave office early after parliament voted in December to impeach her
over the corruption scandal, which has triggered big weekly rallies calling for
her to step down. The impeachment must be upheld or overturned by the
Constitutional Court.A spokesman for prosecutors, Lee Kyu-chul, told a briefing
the Samsung leader had been summoned for questioning at 9:30 a.m. on Thursday
(7 p.m. ET on Wednesday) over suspicions including bribery.He declined to comment on whether Jay Y. Lee or other Samsung
executives will be indicted but would not rule out the possibility of the
prosecution seeking an arrest warrant against Lee. A Samsung Group spokeswoman
declined to comment.Proving quid-pro-quo dealings between the Choi-linked
organizations and Samsung are critical to prosecution efforts to bolster its
case against President Park and show that she, or a surrogate such as Choi,
collected bribes in exchange for favors, analysts said.For Samsung and its founding Lee family, an indictment or
conviction of Jay Y. Lee would deal a blow to efforts to secure a stable
transfer of control to heirs from ailing patriarch Lee Kun-hee.The conglomerate has undergone major restructuring since 2014
to streamline its ownership structure and consolidate power under Jay Y. Lee
and his two sisters.Park Ju-gun, head of corporate analysis firm CEO Score, said
while professional managers at affiliates such as Samsung Electronics would be
able to keep the companies operating smoothly in the absence of Jay Y. Lee, key
initiatives such as acquisitions and investments into new businesses would
inevitably be slowed should the 48-year-old be imprisoned."I think Samsung Group is facing a bigger crisis than
even the death of Chairman Lee Kun-hee," he said, referring to billions of
dollars in inheritance taxes the Lee family heirs will be forced to pay when
their father dies.Samsung has acknowledged making contributions to two foundations
as well as a consulting firm controlled by Choi but has repeatedly denied
accusations of lobbying to push through a controversial 2015 merger of its
Samsung C&T and Cheil Industries Inc units.The prosecution this week summoned two senior Samsung Group
officials for questioning, though they were listed as witnesses.National Pension Service chief Moon Hyung-pyo was arrested
in December after acknowledging he pressured the fund to approve the merger
while he was health minister.Park, 64, has described support of the merger as a policy
decision made by the world's third-largest pension fund in the national
interest.Lee denied bribery accusations during a December
parliamentary hearing, rejecting assertions from lawmakers that Samsung lobbied
to get the fund to back the mergerThe special prosecutors' office said on Wednesday it was
looking into whether Lee gave false testimony during the parliamentary hearing."The special prosecutor needs Samsung to establish a
potential bribery charge against President Park Geun-hye," said Shin Yul,
a political science professor at Myongji University."Samsung is the one that has made the biggest
contributions among conglomerates and it had an exclusive relationship with
Choi Soon-sil, buying a horse," Shin said, referring to the firm's
sponsorship of Choi's daughter's equestrian career.The daughter, Chung Yoo-ra, was arrested in Denmark this
month after being sought by South Korean authorities.
DE FACTO LEADER
Lee, the vice chairman of flagship affiliate Samsung
Electronics Co Ltd (005930.KS), has been leading South
Korea's top conglomerate since his father was incapacitated by a May 2014 heart
attack.Shares in Samsung units did not move sharply following the news
that Jay Y. Lee was named a suspect, as some investors had anticipated the
possibility that he could be formally indicted. Shares of Samsung Electronics
ended up 2.8 percent, though off its high for the day, after trading at a
record 1.928 million won.The shares could see a correction because of heightened
uncertainties, but the stock will see support from strong earnings prospects,
said HDC Asset Management fund manager Park Jung-hoon.Shares of firms such as Samsung C&T Corp (028260.KS) that are more closely linked
with potential succession-related restructuring may weaken further, Park said,
as formal prosecution of Lee could delay the process."I think some investors are still uncertain on whether the
special prosecutors will go as far as arresting and detaining Jay Y. Lee, given
the uncertainties such an action might trigger on Samsung companies," he
said.In 2008, Lee Kun-hee stepped down as Samsung Group chairman
after group executives were indicted on suspicion of brokering a sweetheart
deal for his children to have a greater ownership stake in Samsung's de facto
holding company.He was handed a suspended 3-year sentence for tax evasion, but
was eventually pardoned.(Reporting by Se Young Lee and Ju-min Park; Editing
by Clarence Fernandez and Tony Munroe)
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