Court Detaining Lee Jae-yong Imposes Tasks on Samsung Compliance Committee

[Asia Economy Reporter Seongpil Cho] The 'state affairs manipulation' case involving Samsung Electronics Vice Chairman Lee Jae-yong is approaching its final stage as the retrial was concluded on the 18th. However, even if this verdict is finalized, the trial for the separate case concerning the 'management succession suspicion' is still in its early stages. While Vice Chairman Lee's legal battles are not yet over, the retrial court has assigned Samsung a task regarding the management succession suspicion case.

Lee Jae-yong, Vice Chairman of Samsung Electronics [Photo by Yonhap News]

Court Points Out "Compliance Committee Did Not Investigate Merger Case"

The Seoul High Court Criminal Division 1 (Presiding Judge Jung Jun-young) judged that the Samsung Compliance Committee lacked effectiveness in the retrial sentencing for Vice Chairman Lee's bribery charges. Earlier, the court had indicated during the trial that it would consider the Compliance Committee's activities in sentencing, but this ultimately resulted in 'Vice Chairman Lee's detention in court.' The court sentenced Vice Chairman Lee to 2 years and 6 months in prison that day.

In the verdict, the court detailed reasons for not recognizing the effectiveness criteria of the Compliance Committee. It also pointed out deficiencies, stating that "the Samsung Group's compliance monitoring system needs improvement." One such deficiency was the investigation related to the Samsung C&T and Cheil Industries merger case. The court stated, "Analyzing the history of the relevant company in compliance monitoring is an essential task for preparing responses to anticipated legal risks, but the Samsung Compliance Committee did not initiate an investigation into the Samsung C&T and Cheil Industries merger case."

Kim Ji-hyung, Chairman of Samsung Compliance Committee / Photo by Kang Jin-hyung aymsdream@

Samsung Announces "Continued Guarantee of Compliance Committee Activities"

The Samsung Compliance Committee was launched in February last year with former Supreme Court Justice Kim Ji-hyung appointed as chairman. It was organized as an independent body, ostensibly not under Samsung's direct control. Some have evaluated that the rationale for the Compliance Committee's continuation weakened following Vice Chairman Lee's detention and the court's negative assessment. However, Samsung is reportedly planning to continue guaranteeing the Compliance Committee's activities.

From the Compliance Committee's perspective, the issues pointed out by the retrial court the day before are expected to become tasks to be resolved in the upcoming trial concerning the management succession suspicion. If an investigation into the Samsung C&T and Cheil Industries merger case is conducted and the results submitted to the presiding court, it could positively influence judgments on guilt and sentencing. Previously, the Compliance Committee did not investigate the Samsung C&T and Cheil Industries merger case, citing it as a matter prior to its establishment.

Samsung flag hanging at Samsung Life Insurance Seocho Building in Seocho-gu, Seoul [Image source=Yonhap News]

Formal Trial on Management Succession Suspicion to Begin Soon

Vice Chairman Lee is also undergoing a first trial for allegations of intervening in the merger process between Samsung C&T and Cheil Industries to secure management succession. He was indicted last September on charges including unfair trading and market manipulation under the Capital Markets Act, breach of fiduciary duty, and violation of the External Audit Act. Another intense legal battle is expected, separate from the state affairs manipulation case.

The management succession suspicion case is being handled by the Seoul Central District Court Criminal Division 25-2 (Presiding Judge Lim Jeong-yeop). The court plans to announce the trial schedule for Vice Chairman Lee next month. The second preparatory hearing originally scheduled for the 14th was postponed due to the spread of the novel coronavirus disease (COVID-19). Legal circles anticipate that the trial related to the management succession suspicion will take at least one year at the first trial level.

This content was produced with the assistance of AI translation services.