Lee Reportedly Denies Allegations
Samsung Electronics vice chairman Lee Jae-yong was questioned by prosecutors on May 26 over his alleged involvement in the controversial merger of Samsung Group’s two affiliates, Samsung C&T and Cheil Industries, five years ago.
The Seoul Central District Prosecutors' Office summoned Lee as a defendant and grilled him on whether he gave instructions to or received briefings from the group’s Future Strategy Office regarding the merger.
Lee is said to have denied the allegations, claiming that he never ordered the merger nor received any reports about it.
The prosecution suspects that Samsung management inflated the value of Cheil Industries to help Lee, who is the company’s largest shareholder, secure control of the merged company, which would be at the top of Samsung Group’s governance structure.
Prosecutors also suspect that the group’s Future Strategy Office inflated the value of Samsung Biologics, a subsidiary of Cheil Industries, by manipulating its accounting figures to facilitate the transfer of the group’s managerial control to Lee.
Samsung Biologics is now on a steep growth path. The company has grown into the nation's third largest company with 40 trillion won in market capitalization.
In a lawsuit aimed at nullifying Samsung C&T’s merger with Cheil Industries, the court acknowledged that the merger ratio was justly set in comliance with the Capital Market Act, but the prosecution is taking issue with the merger ratio again.
The prosecution claims that Samsung management intentionally lowered the value of Samsung C&T ahead of its merger with Cheil Industries to benefit Lee, but Samsung C&T shares are still valued at around 60 percent of its assets.
A year and a half after an investigation was launched into the merger, the prosecution started direct questioning of Lee, fueling uncertainties over management of Samsung Group.
"Samsung has been in a difficult situation due to endless investigations and trials on Lee at a time when internal and external business conditions keep changing rapidly," a business watcher said.
Moreover, some predict that the prosecution's investigation will deal a direct blow to Samsung’s global management, given that Lee recently disclosed a "New Samsung" vision, declaring that he would not transfer the group’s management rights to his children and devote himself to preparing for the future by fostering new businesses.
Choi Joon-seon, a professor emeritus at Sungkyunkwan University, said, “An investigation into a company should be quickly completed. The ongoing prosecution investigation into Samsung Group should be the final one. Lee needs to be allowed to freely implement his global management.”