‘Trial of the century’ begins as Samsung’s Jay Y Lee in dock

The trial of Samsung Electronics vice chairman Jay Y Lee began on Thursday as prosecutors try to prove the billionaire conspired to funnel millions of dollars to a confidante of President Park Geun-hye to help secure control of the world's largest smartphone maker.

Mr Lee is the highest-profile business figure indicted in a sprawling corruption investigation that’s also led to Park’s impeachment and spurred outrage over “chronic corruption” in ties between government and family run conglomerates. Special prosecutor Park Young-soo has called the legal contest surrounding Mr Lee South Korea’s “trial of the century”, given his global profile and the amount of money involved.

Hearings at Seoul’s Central District Court are set to last up to three months, during which time Mr Lee will challenge charges from bribery to embezzlement. The biggest point of contention will be whether Samsung’s donations to entities led by Park’s friend, Choi Soon-sil, were intended to win government backing for a controversial 2015 merger that made it easier for Mr Lee to control the Samsung Group chaebol (business conglomerate). The 48-year-old executive has denied wrongdoing.

“Proving there was an exchange of money for favours is going to be challenging,” said Hong Jung-seok, a lawyer who worked for the special prosecution until the end of last month. “The trial will draw attention from around the world, not just for the defendant’s fame abroad, but also for the size of the alleged bribe.”

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Alleged political favours

Shares in Samsung Electronics, the conglomerate's largest corporation, stood largely unchanged, even with some of the most powerful figures in the country under scrutiny several miles apart. A constitutional court will decide at 11am on Friday whether to uphold Park's impeachment and remove her from office, a ruling almost certain to provoke protests whatever the outcome. The scandal has already engulfed the streets of Korea's capital for months, as protests spring up regularly under the watchful eyes of police in riot gear.

In trying to prove their case, prosecutors will probe the complex web of ties through which the chaebol that control Korea’s economy allegedly trade money for political favours.

The prosecutor’s investigation has already led to about 30 indictments and ensnared establishment figures from the president of a prestigious university to the head of the country’s horse-riding association, who’ve been accused of easing Choi’s daughter’s college admission and equestrian lessons.

Mr Lee now faces between five years and life in prison if convicted. Under South Korea’s three-tier judiciary system, Mr Lee can turn to an appellate court and then the Supreme Court if he loses, with each court taking up to two months to deliberate. His own father avoided jail despite two previous criminal convictions, thanks to government pardons.

Mr Lee’s predicament casts uncertainty over the succession at Samsung, which has been in transition since his father suffered a crippling heart attack in 2014. The prolonged absence of its de-facto head may delay major decisions at Samsung Electronics, which is set to unveil the latest version of its flagship smartphone, the Galaxy S8, this month. Still, Samsung has said it has a strong management team in place to run the business, and the company’s shares have risen 11.5 per cent this year, more than three times the gain in the benchmark KOSPI index.

Hiding assets overseas

Detained outside Seoul since February, Mr Lee must win the trial to resume guiding a $240 billion corporation trying to bounce back from last year’s botched debut of the Note 7: some of the phones burst into flames.

Mr Lee was indicted last month along with four other Samsung executives, but he was the only one detained. The prosecutor accuses him of conspiring to transfer 29.8 billion won (€245,509,964) to Choi’s organisations in return for favours. Those allegedly included currying support from the government-backed National Pension Service for a 2015 merger of Cheil Industries and Samsung CandT Corp.

That deal – which cemented Mr Lee’s control – was narrowly approved over the opposition of activist investor Paul Elliott Singer.

Other charges against Mr Lee include hiding assets overseas and criminal profits, and perjury. Samsung said on Monday that it disagrees with the findings. “Samsung has not paid bribes nor made improper requests seeking favours. Future court proceedings will reveal the truth,” it said in a statement.

The trial begins just before South Korea’s constitutional court, a separate legal branch, wraps a months-long deliberation on a December impeachment motion passed against the country’s president. Should the court approve the motion, Park will lose her presidential immunity and an election will follow in two months to replace her.

The president has so far refused to be questioned by prosecutors over suspicions that she asked Lee to support Choi financially. She’s even barred investigators from entering the Blue House, the palatial Korean seat of power. A lawyer for Park on Monday reiterated her denial of the allegations.

– Bloomberg