Samsung Group, South Korea’s largest conglomerate, is expected to put most of its new business and investment plans on hold, at least temporarily, following the arrest of its heir-apparent Lee Jae-yong, market observers said Friday.
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The bribery charges surrounding Lee allegedly tie in to a major South Korean government corruption scandal, which led to the impeachment of president Park Geun-hye a year ago. Prosecutors allege that the company bribed the government to the tune of 43bn won (£30.2m) via Park’s associate Choi Soon-sil, to secure state backing for a 2015 corporate merger. Both President Park Geun-hye and her friend Choi-Soon Li have denied any wrongdoing. The conglomerate’s main company, Samsung Electronics, alone accounts for 20 per cent of the country’s exports.
Among other allegations, Lee is accused of paying almost $40 million in bribes to a confidante of the impeached president to secure policy favours.
Lee avoided arrest last month when the court dismissed prosecutors’ request, citing the lack of evidence.
At a parliamentary hearing in December, Lee denied being involved in any bribery scheme but admitted that Samsung had given a $900,000 horse to Choi’s daughter, an Olympic equestrian hopeful.
They have also requested an arrest warrant for Samsung Electronics President Park Sang-jin, who was also questioned on Monday. The heir, who took over Samsung in the absence of his sick father, was in charge of the company during last year’s Galaxy Note 7 recall. According to media reports, the court said in a statement: “It is acknowledged that it is necessary to arrest [Lee Jae-Yong] in light of a newly added criminal charge and new evidence”.
However, Lee’s arrest would have an impact on longer-term investment decisions, said Kim, now a professor at Sungkyunkwan University. A court will rule in the coming weeks on whether to permanently remove Ms. Park or reinstate her powers.
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This week, prosecutors additionally accused Lee of hiding assets overseas and concealing profit gained from criminal acts. Choi’s daughter Chung Yoo-ra who’s also implicated in the scandal is now under arrest in Denmark and is expected to be extradited to South Korea in the coming weeks.
