Lee Jae-yong Merger Allegation Trial... How the Prosecution Responds to Defense Counsel's Challenges

On the 1st, at the Seoul Central District Court, the trial of Samsung Electronics Vice Chairman Lee Jae-yong was held. Former Samsung Securities employee Han Mo stood as the seventh witness regarding suspicions of the group’s merger and succession. The courtroom, which had been quiet until the morning, became tense in the afternoon as the prosecution began its cross-examination. The voices of both sides grew louder as the defense raised objections intermittently during the prosecution’s questioning. The prosecution even showed an agitated response, saying, "Let us proceed with the questioning."

Lee Jae-yong, Vice Chairman of Samsung Electronics

Prosecution: "The Merger Ratio Itself Was Illegal"

During the cross-examination, the prosecution devoted most of the time to proving the premise that the merger ratio between Cheil Industries and Samsung C&T was inappropriate. At the time of the 2015 merger, the ratio was 1 to 0.35, valuing Samsung C&T at about one-third of Cheil Industries. The prosecution views this as an illegal succession of management rights favorable to Vice Chairman Lee, who was the largest shareholder of Cheil Industries but held no shares in Samsung C&T.

Prosecutor: When you worked at Samsung Securities, you provided procedural advice regarding the merger between Samsung C&T and Cheil Industries. Even if it was procedural advice, it seems there would have been a conflict of interest between Samsung C&T and Cheil Industries. What was your position on this?

Witness: I tried to provide objective facts as much as possible and, if there were conflicts of interest, to have both companies discuss and reach an agreement. However, it seems the only conflict of interest was regarding the merger ratio.

Prosecutor: So you admit that aside from the merger ratio, there was little else, meaning the merger ratio itself created a conflict of interest, correct?

The Samsung Electronics building located in Seocho-gu, Seoul [Image source=Yonhap News]

Defense Raises Objections... Prosecution Retorts

The defense appeared displeased with the prosecution’s questioning framework and raised objections. Their protest was essentially that the questions should objectively inquire about the circumstances, rather than presuppose the case as abnormal.

The prosecution was also unwilling to back down. Chief Prosecutor Lee Bok-hyun retorted, "The defense also asked questions with that (framework), didn’t they?" Although the court tried to mediate, Chief Prosecutor Lee did not stop his determined remarks. "We have no complaints about the lengthy direct examination, but the defense has been questioning all morning as well. Still, we did not say anything. As you said, we will consider it, so please allow us to proceed quickly with the questioning."

During the prosecution’s questioning afterward, the defense continued their so-called 'checks.' They intermittently requested, "Please shorten the questions," or "Please do not question during the witness’s answers," appearing to restrain the prosecution’s examination. In response, Chief Prosecutor Lee shouted, "That is inappropriate," and "Let us proceed with the witness questioning."

Han’s Final Testimony: "I Did Not Provide Advice That Violated the Law"

Toward the end of the prosecution’s questioning, they confirmed with Han whether the advice regarding the purchase and sale of treasury stocks to secure voting rights was lawful. The merger should proceed while protecting the interests of shareholders of both companies, but this approach was viewed as benefiting only specific shareholders.

Prosecutor: You provided advice on treasury stock purchases, which some might consider a violation of the Capital Markets Act. Were you aware of the potential illegality when giving this advice?

Witness: I did not think there would be legal problems. However, for any client, I try to provide advice through lawful processes. Practical errors can occur due to busyness or other reasons.

Prosecutor: So you are saying the advice was lawful?

Witness: I do not provide advice that violates the law.

The prosecution’s questioning ended with this question. In addition to this day, the prosecution had conducted direct examination of Han over three trial sessions on May 6, May 20, and June 3.

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

"Project G Was Not Created for Succession Purposes"

After all questioning procedures by both sides were completed, the court asked Han several questions. A notable part was confirming Han’s final stance. "You were involved in drafting Project G and exchanged emails with the Future Strategy Office. In your view, was Project G a document for group-level defense purposes, or was it intended for Vice Chairman Lee Jae-yong’s management succession?"

Han answered without hesitation, "I understand that I provided advice for the group’s stability. It seems various scenarios were reviewed on how the group would respond. Naturally, situations related to major shareholders were included, but it was not intended for succession purposes."

The court then asked whether Project G, commissioned by the Future Strategy Office, was simply created at the client company level or was done under instructions from higher-ups as a group member. Han replied, "I naturally thought of them as a client," and "I considered the Future Strategy Office as one of the clients and worked accordingly."

In previous trials, when asked why Project G was created, Han stated, "It was not to increase the major shareholder’s group shareholding ratio, but to prepare for the company’s development by improving the overall governance structure." On the other hand, the prosecution believes that Samsung Group, after initially establishing Project G in December 2012, proceeded with succession work for Vice Chairman Lee. When Chairman Lee Kun-hee’s illness abruptly changed the situation, the plan was revised to promote the listing of Cheil Industries (formerly Everland).

The witness examination of Han concluded on this day. The court plans to proceed with the witness examination of Lee Mo, who was dispatched to the Samsung C&T merger task force, starting from the next session on the 8th.

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