Key Points
- South Korean prosecutors have sought a five-year jail term for Samsung Chairman Jay Y. Lee, citing misconduct in a 2015 merger of Samsung affiliates.
- Lee and former executives deny claims of prioritizing personal control over shareholder interests during the merger.
- The case follows Lee’s acquittal of fraud and manipulation charges earlier this year, which prosecutors have appealed.
- Samsung faces declining profits, lagging competitiveness in AI chips, and mounting competition from TSMC.
South Korean prosecutors have requested a five-year prison sentence for Samsung Electronics Chairman Jay Y. Lee over his involvement in a controversial 2015 merger of Samsung affiliates, allegedly strengthening his control over the conglomerate. The case, being retried in an appeals court, follows a February ruling by the Seoul Central District Court that acquitted Lee of accounting fraud and stock manipulation charges. Prosecutors appealed the decision, leading to the current hearings, which concluded on Monday.
The merger in question involved Samsung C&T and Cheil Industries, which prosecutors argue was orchestrated to benefit Lee’s position as the de facto leader of the Samsung Group at the expense of minority shareholders. Lee and other former executives have denied these allegations, maintaining that the merger was conducted in the company’s best interests.
During closing arguments, prosecutors claimed that Lee prioritized his personal control over the conglomerate above the rights of shareholders and investors. Addressing the court in his final statement, Lee acknowledged Samsung’s current challenges and appealed for leniency. “The reality that we faced is challenging more than ever,” Lee stated. He pledged to steer Samsung through its difficulties and contribute to South Korea’s economy.
The case casts a shadow over Lee’s leadership as Samsung confronts various issues, including declining profits and a significant drop in stock prices—down over 25% this year. The conglomerate has struggled to compete with smaller rival SK Hynix in the booming market for AI chips. It faces increasing competition from Taiwan’s TSMC, a dominant player in semiconductor manufacturing.
Samsung also navigates external pressures, including concerns over potential U.S. tariffs under President-elect Donald Trump’s administration. These challenges and internal leadership uncertainty have raised doubts about Lee’s ability to guide Samsung through its current difficulties.
If the appeals court upholds the lower court’s not guilty ruling, Lee may secure greater freedom to lead Samsung without immediate legal hurdles. However, should prosecutors further escalate the case to the Supreme Court, the uncertainty around Lee’s leadership may persist.
