Samsung Leader Testifies -- WSJ

Group's de facto head claims ignorance of payments made in South Korean scandal

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (August 3, 2017).

SEOUL -- The de facto head of the Samsung conglomerate defended himself in court for the first time since his February arrest over a political scandal that has gripped South Korea and toppled its president.

Lee Jae-yong, who has been in custody since the arrest, stepped into the stand Wednesday wearing a navy-blue suit and responded to questions from prosecutors, his attorney and judges for over five hours.

The 49-year-old Mr. Lee -- grandson of Samsung's founder and vice chairman of Samsung Electronics Co. -- had been on the sidelines during court hearings since the first one in April, when he responded to basic questions from the judge confirming his identity. The other four defendants, former Samsung officials who include the onetime head of the conglomerate's corporate strategy office, have already testified.

Mr. Lee faces multiple charges, including bribery.

Along with former President Park Geun-hye, Mr. Lee is one of the highest-profile figures in the corruption scandal. Ms. Park was removed from office in March by the country's Constitutional Court, after her impeachment over accusations that she colluded with her friend Choi Soon-sil to extort money from Samsung and other South Korean conglomerates.

The prosecutors' case centers on some $37 million that Samsung arranged to pay to entities allegedly controlled by Ms. Choi. The payments include an $18.6 million equestrian agreement Samsung made with a small sports consulting company in Germany.

In his testimony, Mr. Lee claimed ignorance of Samsung's payments and dismissed allegations that he had sought favors from South Korea's former president, denying prosecutors' accusation that he had ordered his company to fund entities linked to Ms. Choi. "About 95% of my responsibilities are with Samsung Electronics and its affiliated companies," he said, adding that he wasn't generally briefed on the conglomerate's sports-related donations.

Prosecutors say Mr. Lee ordered his company to fund entities linked to Ms. Choi, and that in exchange Ms. Choi colluded with Ms. Park to have the country's pension service cast a decisive vote in favor of a 2015 merger of two Samsung affiliates. That deal was seen as critical to consolidating Mr. Lee's grip on Samsung Electronics Co., the world's biggest smartphone maker. Samsung has acknowledged making the payments, but has denied they were in exchange for political favors. Ms. Park and Ms. Choi have both denied wrongdoing.

Mr. Lee testified that the merger was decided by the heads of the two Samsung affiliates and dismissed its link to his succession. "To this day, I don't understand how the merger strengthens my link to Samsung Electronics," he said, adding that even without the merger, his role in the company wouldn't have changed.

Wednesday's court hearing also zeroed in on Mr. Lee's three private meetings with the former president between 2014 and 2016, in which prosecutors allege Mr. Lee asked for government favors.

Mr. Lee admitted that Ms. Park had asked him for Samsung's support in equestrian activities in the first meeting. In the second meeting, Mr. Lee said that Ms. Park reprimanded him for not following through on her equestrian requests, but said he didn't think too much about why the former president was showing so much interest in equestrian activities.

Prosecutors said that Samsung's agreement to fund a German sports consulting company to train equestrian athletes, including Ms. Choi's daughter, came just one month after Mr. Lee's second meeting with Ms. Park. Mr. Lee said he didn't know of Samsung's agreement with the German company or of Ms. Choi's link to it at the time.

Mr. Lee has been the de facto leader of the conglomerate since his father, Samsung Chairman Lee Kun-hee, was incapacitated by a heart attack in 2014.

The "trial of the century," as the domestic news media has dubbed it, has trained a spotlight on South Korea's long history of close ties between government and business. The dozens of witnesses have included government officials, former and current athletes, bankers and the incumbent head of the country's antitrust watchdog.

The court is expected to finish questioning defendants this week and hold its final hearing early next week. A verdict is likely before Aug. 27, the last day that Mr. Lee can be held in custody without a conviction under South Korean law.

Write to Eun-Young Jeong at

(END) Dow Jones Newswires

August 03, 2017 02:47 ET (06:47 GMT)