Korean prosecutors question Samsung heir in succession-related probe

[May 26, 2020]  By Hyunjoo Jin

SEOUL (Reuters) - Samsung Group heir Jay Y. Lee was questioned on Tuesday by prosecutors about a controversial 2015 merger and alleged accounting fraud that they said may have helped him advance his succession-planning agenda at the country's top conglomerate.

The questioning brings fresh legal trouble for Lee who is already facing court trial over a charge of bribery aimed at winning support to succeed ailing group patriarch Lee Kun-hee, and which involved former South Korean President Park Geun-hye.

Prosecutors have been investigating suspected accounting fraud at drug company Samsung Biologics after the Korean financial watchdog complained the firm’s value had been inflated by 4.5 trillion won ($3.64 billion) in 2015.

They have alleged that Biologics had violated accounting rules to help improve the value of its major owner Cheil Industries, which counted Lee as its top shareholder, Yonhap News Agency, which first reported Lee's questioning, said.

Cheil, Samsung Group's fashion and theme-park operator, merged with de fact group holding company Samsung C&T in a 2015 transaction that enabled Lee to become the top shareholder of Samsung C&T.

The deal was criticised by U.S. hedge fund Elliott Management and other investors for favouring family members at the expense of minority shareholders.

The prosecutors' office confirmed Lee was summoned for questioning.

"We today summoned a relevant person with regard to Samsung Group's illegal merger and accounting fraud case," an official at the Seoul Central District Prosecutors' office told Reuters.

A spokesman at Samsung Electronics, the conglomerate's biggest company where Lee is vice chairman, declined to comment.

Lee, 51, served a one-year detention over the bribery case until it was suspended in 2018, but the possibility of a tougher sentence has emerged after the Supreme Court overturned a lower court ruling on the case last year.

Earlier this month Lee apologised for the bribery scandal and pledged that he would not pass on the company founded by his grandfather to his children. But it has been criticised by governance experts for lacking details.

"There are still a lot of controversies related to his management succession. He will not be able to avoid public criticism," said Park Ju-gun, head of research firm CEO Score.

(Reporting by Hyunjoo Jin; Editing by Miyoung Kim and Muralikumar Anantharaman)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.