Court says ex-Samsung boss guilty over bond deal

[August 14, 2009]  SEOUL, South Korea (AP) -- A Seoul court ruled Friday that former Samsung Chairman Lee Kun-hee was guilty of breach of trust and handed him a suspended prison sentence in another legal blow to the South Korean tycoon.

The Seoul High Court sentenced Lee to three years in prison and fined him 110 billion won ($89.2 million) but he won't go to jail if he stays out of trouble for five years. The case centered on charges that Lee caused damage to a Samsung Group company by issuing a type of bond at below market prices.

The 67-year-old Lee, wearing a dark, pinstriped suit, listened quietly to the verdict and then left the courtroom. Samsung had no comment on the ruling and said there had been no decision on whether Lee would appeal.

Lee, ranked as South Korea's richest person by Forbes Magazine, led Samsung for 20 years following the death of his father, the conglomerate's founder. He has faced a series of legal troubles the past two years and was convicted in 2008 on tax evasion charges and given a suspended prison term.

But the Supreme Court in May upheld lower court rulings that cleared him of alleged illegal financial dealings purportedly aimed at passing control of the business empire to his son.

Lee is a South Korean corporate icon who has personified Samsung. He is widely credited with turning Samsung Electronics Co. into a respected global brand. But he resigned as chairman of the company, the conglomerate's flagship corporation, upon indictment for tax evasion and other charges in April 2008.

The Seoul High Court was hearing the breach of trust case for a second time after the Supreme Court in May ordered it to reconsider an earlier verdict.

Presiding Judge Kim Chang-suk said that Lee caused damage of 22.7 billion won to the group company, Samsung SDS, over the issuance of bonds with warrants at about half of their market price.

But he cited Lee's "considerable contribution to the development" of the company in handing down the suspended prison sentence.

He also said that Lee had paid back more than the amount of the damage caused to Samsung SDS, which specializes in system integration and other IT services.

Samsung Group comprises dozens of companies. Besides electronics, it has interests in shipbuilding, construction, insurance and leisure. Its companies account for a big slice of South Korea's exports.

Civic groups have dogged the conglomerate for years, claiming its opaque ownership structure based on cross-shareholdings by group companies led to abuses and was meant to ensure the Lee family maintains control.

The verdict didn't bother investors. Shares in Samsung Electronics rose 4.1 percent to close at 731,000 won. Samsung SDS is unlisted.

Lee, who is a member of the International Olympic Committee, was also convicted in 1996 along with other conglomerate chiefs over presidential bribery. That conviction also resulted in a suspended prison sentence.

Lee is not alone among prominent South Korean tycoons in avoiding prison terms. Judges have generally shown leniency, sometimes citing the importance and contribution of the corporate chiefs to South Korea's economy.

Hyundai Motor Co. Chairman Chung Mong-koo, for example, was convicted of embezzlement in 2007 and given a three-year prison term. An appeals court later suspended the sentence for five years, saying he was too important to the country's economy to go to jail.

Chung received a presidential pardon last year along with two other prominent convicted business leaders, part of a traditional amnesty ahead of the anniversary of the Korean peninsula's liberation from Japanese colonial rule in 1945.

[Associated Press; By JAE HEE SUH]

Associated Press writers Kwang-tae Kim and Wanjin Kim contributed to this report.

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