Samsung Heir Lee Jae-yong Convicted of Bribery, Gets Five Years in Jail -- 2nd Update

By Eun-Young Jeong Features Dow Jones Newswires

Samsung's de facto leader, Lee Jae-yong, was found guilty of bribing South Korea's president and sentenced to five years in prison on Friday for his role in a corruption scandal that helped bring down the previous government.

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Mr. Lee, the vice chairman of Samsung Electronics Co. and the heir to South Korea's largest conglomerate, didn't show any obvious reaction to the sentence as he left the courtroom. His lawyers said they planned to appeal the decision immediately.

While less than the 12 years sought by prosecutors, the sentence extends a period of uncertainty at Samsung, with Mr. Lee behind bars and his father, the Samsung chairman, incapacitated following a heart attack three years ago.

Prosecutors alleged Mr. Lee tried to bribe President Park Geun-hye in return for government backing for key Samsung business deals. Along with bribery, he was charged with embezzlement, hiding assets abroad, concealing criminal profits and perjury. The court found Mr. Lee guilty on all charges.

Samsung had acknowledged it agreed to pay about $38 million to entities linked to the president's close friend, Choi Soon-sil, of which about half went toward a German sports-consulting company to pay for equestrian training for Ms. Choi's daughter. Samsung denied the payments were in return for favors.

The court found that most of the payments related to the equestrian training constituted bribes, where Mr. Lee had embezzled about $5.7 million. The total figure for embezzlement and bribery was higher.

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In exchange for these financial contributions, prosecutors say, Ms. Choi colluded with Ms. Park to ensure government backing for several deals, most notably a controversial merger of two Samsung affiliates in 2015 that helped Mr. Lee consolidate his hold over Samsung Electronics. The merger changed Samsung's intricate cross-shareholding structure and, prosecutors said, allowed Mr. Lee to avoid a steep inheritance-tax bill as he sought to succeed his father at the top of the conglomerate.

Mr. Lee denied all the charges. He testified earlier this month that as vice chairman of Samsung Electronics he was rarely involved in decisions affecting the broader Samsung empire, which spans dozens of companies.

Ms. Park, who was removed from office following a unanimous vote by the Constitutional Court in March, is facing a separate trial on 18 charges, including bribery and coercion. She has denied wrongdoing. Ms. Choi, her friend, is also facing charges in connection with the scandal and has also denied wrongdoing.

The judge ruled that Mr. Lee would have known that Ms. Park's request for Samsung to support equestrian activities would have been for Chung Yoo-ra, the daughter of her friend, Ms. Choi.

Friday's verdict caps four months of hearings in what South Korean media dubbed the "trial of the century"--involving 59 witnesses from the worlds of sports, banking and government.

The trial reflected a new rigor in South Korea in scrutinizing the close ties between government officials and the powerful family-run conglomerates known as chaebols that dominate the country's economy. The ruling is seen by many in South Korea as a watershed moment in long-running efforts to overhaul the system.

"Lee Jae-yong's imprisonment is going to alter or abolish the traditionally close alliance between the government and big businesses," said Chung Sun-seop, head of corporate-research firm Chaebul.com in Seoul. "For chaebols, it could mean not having to contribute as much political funds."

Public anger over the corruption scandal contributed to Ms. Park's ouster as president in March. In May, the left-leaning Moon Jae-in was elected as president after campaigning on loosening the ties between government and chaebols.

A spokesman for Mr. Moon said the president hopes the verdict "will be a chance to break the close relationship between political and business circles that has been a stumbling block to our society's progress."

The monthslong trial has raised other questions about Mr. Lee's role at Samsung. Choi Gee-sung, a former Samsung executive involved in the same trial, testified that he, not Mr. Lee, was responsible for decision-making across the conglomerate. Mr. Lee also testified that he had deferred decisions to Mr. Choi.

Mr. Lee also drew a firm line on his involvement in conglomerate-level matters, saying his responsibilities were primarily with Samsung Electronics.

Mr. Lee, 49 years old, has been detained since February while undergoing trial. Song Wu-cheol, his lawyer, said outside the courtroom that he couldn't accept the verdict and would immediately appeal.

"I am confident that the appeals court will definitely find the defendants not guilty on all counts," Mr. Song said.

Yang Jae-sik, a prosecutor involved in Mr. Lee's case, said it was meaningful that the court accepted that Samsung's payments to two sports firms related to Ms. Choi were bribes. Mr. Yang said prosecutors would examine the verdict before deciding whether to challenge the severity of Mr. Lee's sentence or some aspects of the bribery and embezzlement charges that weren't fully accepted by the court.

Separately on Friday, the court convicted four other Samsung executives involved in the same case. Two were given four-year sentences and two received suspended sentences. They faced similar charges as Mr. Lee, but not perjury; all denied wrongdoing.

Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com

(END) Dow Jones Newswires

August 25, 2017 05:37 ET (09:37 GMT)