Samsung Electronics executive chairman Jay Y. Lee has been declared not guilty on the charge of stock price manipulation and accounting fraud related to the merger of Samsung affiliates in 2015, a South Korean Court ruled on Monday.
In the November hearing, prosecutors had called for Lee to be in jail for five years and a fine of 500 million KRW ($375,000) over charges of violating the Capital Markets Act — accounting fraud and stock manipulation connected to an $8 billion merger of Samsung affiliates in 2015. The South Korean prosecutors alleged the merger helped Lee secure his control of the Korean tech giant.
Lee denied his wrongdoing and claimed that the merger and accounting processes were part of normal management activities for the company in the hearing last November. Lee also said he had never had personal gain concerning the merger and had never tried harming other shareholders to increase his stake in Samsung’s affiliate.
The ruling could still face appeals from prosecutors.
Merger case in 2015
There are three key takeaways the South Korean prosecutors claim. Lee, then vice-chair of Samsung Electronics in 2015, and other executives at the firm inflated the stock price of Cheil Industries, Samsung’s textile affiliate, and depreciated its construction subsidiary Samsung C&T during the merger, which is an illegal process to benefit Lee, giving greater control of Samsung Electronics, the South Korean prosecutors claimed.
According to the prosecutors, Samsung’s merger process took a toll on the shareholders of Samsung C&T.
Lee is also accused of engaging in a $3.9 billion accounting fraud at Samsung Biologics, Samsung’s biopharmaceutical unit, as part of the same case.
“The ruling confirmed that the merger of Samsung C&T and Cheil, as well as Samsung Biologics’ accounting, was legitimate,” Lee’s lawyer said in a statement. “I sincerely thank the court for making a sagacious judgment.”
In a separate case related to the merger, the Samsung chief was convicted of bribing former South Korean president Park Geun-hye. Lee, who went to jail for 18 months from 2017 to 2021, was paroled in 2021 and was granted a presidential pardon in 2022.