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Prosecutors Questioning Closest Aide to Samsung Electronics Vice Chairman Lee
Investigation Zeroing in on Samsung Electronics Top Officials
Prosecutors Questioning Closest Aide to Samsung Electronics Vice Chairman Lee
  • By Michael Herh
  • June 11, 2019, 18:55
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Chung Hyun-ho and Lee Jae-yong

The Seoul Central District Prosecutors' Office is questioning Chung Hyun-ho, president of Samsung Electronics' business support team who is known to be the closest aide to the company’s vice chairman Lee Jae-yong, over his role in the alleged accounting fraud at Samsung BioLogics.

Chung’s summoning suggests that it will not be long before prosecutors call in Lee.

Chung is suspected of ordering on May 5 last year the removal of accounting-related data from Samsung Bioepis, a Samsung subsidiary, in preparation for the prosecution's investigation. Eight Samsung executives and employees, including executives from the business support team who attended a meeting on evidence destruction chaired by Chung, have already been arrested.

Prosecutors suspect that the measures discussed at the May 5 meeting to prepare for the prosecution investigation may have been shared during a meeting of the group's top leaders presided over by Lee at "Seungjiwon" in Itaewon-dong, Seoul, shortly afterwards. Until December last year, documents and materials containing expressions such as "JY" (Lee Jae-yong) were destroyed in large numbers at Samsung BioLogics and its affiliate Samsung Bioepis.

Chung is known to have been involved in the merger between Samsung C&T and Cheil Corp. in 2015. He has been serving as the president of the business support team, which has played the role of a control tower since the powerful future strategy office of Samsung Group was disbanded in February 2017.

On June 5, a Seoul court issued an arrest warrant for a Samsung Electronics executive charged with ordering the destruction of evidence regarding the alleged accounting fraud at Samsung BioLogics.

The suspect, a Samsung Electronics senior executive vice president named Lee and in charge of finance, attended the meeting held on May 5, 2018. He was accused of deciding to manipulate and destroy accounting data and internal documents of Samsung BioLogics and Samsung Bioepis.

Judge Myeong Jae-kwon of the Seoul Central District Court approved pre-trial detention of Lee, saying suspicions of his crimes have been validated and there is concern he might try to destroy evidence.

"The charges have been largely validated and the case is grave, and given the suspect's standing and the results of the investigation so far, there is concern (he will) destroy evidence," the judge said.

Prosecutors suspect that window dressing was committed in 2015 to inflate the value of Samsung BioLogics ahead of its initial public offering in 2016.

The nation's financial watchdog earlier estimated in its own inquiry that the alleged window dressing boosted the value of Samsung BioLogics by approximately 4.5 trillion won (US$3.9 billion).

Prosecutors also suspect that Samsung Group’s top officials were involved in the accounting book fabrication because the valuation of Samsung BioLogics was important to justify the share swap ratio in the merger between Samsung C&T and Cheil Industries.

Critics suspect that the value of Cheil Industries stock was excessively inflated in the merger to benefit Samsung Electronics vice chairman Lee, who was the largest shareholder of Cheil Industries. The merger boosted Lee’s stake in the integrated Samsung C&T, which serves as a holding company for Samsung Group.

In short, prosecutors suspect that the accounting fraud at Samsung BioLogics was committed under a plan to overhaul Samsung Group’s governance structure and facilitate the transfer of the group’s control from the hospitalized group chairman Lee Kun-hee to his son Jae-yong.

This is why Lee is also expected to be questioned by the prosecution. Lee was released from prison in February last year after being behind the bar for nearly a year on charges of providing bribes to ousted President Park Geun-hye's confidante in return for favor in solidifying his control of Samsung Group.