Samsung Vice Chairman Lee Jae-yong's 'Illegal Merger Allegations' Trial Resumes After 5 Months... What Are the Key Issues?

[Asia Economy Reporter Su-yeon Woo] The trial of Samsung Group Vice Chairman Lee Jae-yong, who was indicted on suspicion of illegal merger related to Samsung C&T, will resume after five months. As Vice Chairman Lee, who was sentenced to prison in the state corruption scandal, is embroiled in the trial over illegal merger and accounting fraud allegations, Samsung Group's judicial risks are expected to continue for the time being.

On the 11th, the Seoul Central District Court Criminal Division 25-2 (Presiding Judges Park Jeong-je, Park Sa-rang, Kwon Seong-su) will hold the second pretrial conference for Vice Chairman Lee and Samsung Group officials indicted on charges including violation of the Capital Markets and Financial Investment Business Act.

This pretrial conference is the first trial held after the change of the presiding judges. Originally, the trial was scheduled for January this year but was temporarily postponed due to the impact of COVID-19, and will be held again after five months.

In September last year, the prosecution indicted Vice Chairman Lee and 11 Samsung officials without detention, alleging that Samsung Group systematically planned to create a favorable situation for Lee's succession of management rights during the merger of Samsung C&T and Cheil Industries. Samsung denied all the prosecution's allegations at the first pretrial conference held in October last year. Lee's side claimed that the Samsung C&T merger was a legitimate business activity and that all procedures were conducted lawfully.

In January, Lee Jae-yong, Vice Chairman of Samsung Electronics, attended the sentencing hearing of the retrial for the state corruption case at the Seoul High Court in Seocho-gu, Seoul. Photo by Yonhap News

The biggest issue in this case is whether there was an organized movement by Samsung Group to prepare a merger ratio favorable to Vice Chairman Lee at the time of the 2015 Samsung C&T merger. The prosecution argues that Samsung Group inflated the value of Cheil Industries and deliberately lowered the value of Samsung C&T to increase Lee's control over the group.

Another issue that emerged during this process is the accounting fraud issue of Samsung BioLogics, where Cheil Industries was the largest shareholder at the time. The prosecution claims that Samsung BioLogics violated accounting treatment related to call options in 2015 to avoid capital erosion on its financial statements and systematically concealed this fact.

Samsung's side countered that the accounting treatment was confirmed by many experts as not violating standards, and the court also expressed the view during the warrant review for the suspension of the Securities and Futures Commission's disposition that it is difficult to see it as a violation of accounting standards.

In the trial on this day, before the full-scale dispute, the overall schedule will be coordinated and the court will briefly hear the positions of both sides. Since the pretrial conference does not require the defendant's attendance, Vice Chairman Lee, who was re-incarcerated due to the state corruption scandal, is expected not to attend. Lee is currently serving a 2 years and 6 months prison sentence at Seoul Detention Center after his sentence was finalized in the retrial of the state corruption scandal in January.

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