Lee Jae-yong and 14 Others Acquitted of All 'Illegal Succession Allegations'... Court Says "No Evidence" (Comprehensive)

The court ruled that there were no illegal acts in the merger process between Samsung C&T and Cheil Industries in September 2015, and acquitted all the top executives of the Samsung Future Strategy Office who were tried alongside Samsung Electronics Chairman Lee Jae-yong. This verdict comes approximately three years and five months after the prosecution's indictment.

The Seoul Central District Court Criminal Division 25-2 (Presiding Judges Park Jeong-je, Ji Gui-yeon, Park Jeong-gil) acquitted Chairman Lee, who was charged with unfair trading practices and market manipulation under the Capital Markets Act, as well as breach of duty. Thirteen others tried alongside Chairman Lee, including former Samsung Group Future Strategy Office Chief (Vice Chairman) Choi Ji-sung, former Future Strategy Office Deputy Head (President) Jang Chung-gi, former Future Strategy Office Strategy Team 1 Head (President) Kim Jong-jung, and former Samsung C&T Presidents Choi Chi-hoon, Kim Shin, and Lee Young-ho, were also acquitted.

Samsung Electronics Chairman Lee Jae-yong is leaving the courtroom after being acquitted in the first trial verdict related to accounting fraud and unfair merger at the Seoul Central District Court in Seocho-gu, Seoul on the 5th. Photo by Kang Jin-hyung aymsdream@

The prosecution argued that the 2015 merger between Samsung C&T and Cheil Industries was conducted illegally to allow Chairman Lee to inherit management rights at minimal cost. They suspected various unfair trades led by the Future Strategy Office, then the core leadership of Samsung Group, including spreading false information, announcing false favorable news, purchasing shares from major shareholders, illegal lobbying targeting the National Pension Service, and market manipulation through concentrated stock buybacks. The prosecution concluded that the merger was a 'predatory succession' that harmed shareholders by merging at an unfavorable ratio without properly evaluating Samsung C&T's corporate value. Chairman Lee and others were indicted on September 1, 2020, for violating the Capital Markets Act and other charges.

However, the court found the evidence insufficient for all the charges claimed by the prosecution. In particular, it did not recognize the evidentiary value of text messages and other evidence from the mobile phone of former Future Strategy Office Deputy Head Jang, which the prosecution presented as key evidence during the investigation. The court stated, "The prosecution did not follow a selective procedure for the electronic information extracted from defendant Jang Chung-gi's mobile phone, nor did it fulfill the obligation to delete or discard information unrelated to the criminal charges," adding, "This constitutes a serious violation of the warrant principle and due process." The court further declared, "The search and seizure of the mobile phone were illegal, and all such evidence lacks probative value."

The court also noted that since the merger of the two companies proceeded through the decision-making processes of each board of directors, it could not be seen as a unilateral decision by the Future Strategy Office solely for the purpose of Chairman Lee's succession. The court concluded, "There were business purposes behind this merger, and strengthening group control and stabilizing management rights (by Chairman Lee) also benefit Samsung C&T shareholders," adding, "Based solely on the evidence submitted by the prosecution, it cannot be definitively concluded that the main purpose of this case was the management succession of defendant Lee Jae-yong."

Previously, the Supreme Court Grand Bench ruled on August 29, 2019, in the trial of Choi Seo-won’s political scandal case that "the merger between Samsung C&T and Cheil Industries was part of the succession process." However, the first-instance court interpreted this Supreme Court ruling as merely confirming the existence of the succession process, not its illegality.

On this day, the court also acquitted charges related to false disclosures and accounting fraud involving Samsung BioLogics, a subsidiary of Cheil Industries. The evidentiary value of key evidence, such as the 18-terabyte (TB) backup servers of Samsung BioLogics, which were considered crucial to proving accounting fraud allegations, was not recognized. The court stated, "The prosecution illegally searched and copied electronic information stored on the hidden Logics and Epis servers without taking appropriate measures to selectively replicate and print only relevant evidence and to prevent arbitrary copying of unrelated electronic information," adding, "None of this can be used as evidence to establish guilt."

Kim Yoo-jin, a lawyer from Kim & Chang representing Chairman Lee, said immediately after the verdict, "I believe this ruling clearly confirms that the Samsung C&T merger and Samsung BioLogics’ accounting treatment were lawful," and expressed sincere gratitude to the court for its wise judgment.

However, it is difficult to say that the first-instance ruling has resolved the 'judicial risk' facing Chairman Lee. The prosecution has not yet announced whether it will appeal. If the prosecution decides to appeal within a week, the second trial will involve intense legal battles, ultimately seeking a final judgment from the Supreme Court.

The Seoul Central District Prosecutors' Office stated, "Regarding the first-instance ruling on the Samsung C&T and Cheil Industries merger case involving Chairman Lee Jae-yong and others, we will carefully review and analyze the factual findings and legal judgments of the verdict to decide whether to appeal."

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