Samsung’s Lee Jae-yong Cleared of Charges, Ready to Revolutionize AI Landscape

With Legal Hurdles Cleared, Lee Jae-yong Expected to Accelerate Samsung’s Push into AI and Global M&A {vi1}){vi2})Samsung Electronics Chair Lee Jae-yong was acquitted by the Supreme Court on Thursday, clearing him of all charges related to a controversial 2015 merger between Samsung affiliates that bolstered his control over South Korea’s largest conglomerate.{vi3}){vi4})This final, unappealable ruling ends years of legal battles that have cast a shadow over the Samsung boss, freeing him to focus on revitalizing the tech giant’s struggling operations.{vi5}){vi6})The nation’s highest court dismissed the prosecution’s appeal and upheld a lower court’s not-guilty verdict for Lee and 13 other former Samsung officials, including Choi Gee-sung and Jang Choong-ki, former executives of the group’s now-disbanded control tower, the Future Strategy Office.{vi7}){vi8})They faced accusations of stock manipulation, breach of trust, accounting fraud, and other irregularities linked to the high-profile merger of Cheil Industries and Samsung C&T.{vi9}){vi10})The Supreme Court justices found no errors in the appellate ruling that would suggest “a misunderstanding of legal principles regarding the Capital Market Act and External Audit Act, or a violation of rules on free evaluation of evidence.”{vi11}){vi12})Lee and Samsung executives were indicted in 2020 for allegedly orchestrating wrongdoings related to the 2015 merger, which prosecutors argued was designed to cement Lee’s control over Samsung Group at a reduced cost.{vi13}){vi14})Prosecutors claimed that Lee manipulated stock prices by inflating Cheil Industry’s values while depreciating Samsung C&T to create a favorable merger ratio.{vi15}){vi16})The merger involved exchanging three Samsung C&T shares for each Cheil Industries share. Lee, then vice chair of Samsung Electronics, held a 23.2 percent stake in Cheil but no direct ownership in Samsung C&T. This exchange ratio worked in Lee’s favor, making him the largest shareholder of the newly merged Samsung C&T, the de facto holding company of Samsung Group. The outcome effectively solidified Lee’s succession as the head of the family-controlled conglomerate, taking over from his father Lee Kun-hee.{vi17}){vi18})Prosecutors also alleged that Lee Jae-yong was involved in fraudulent accounting practices at Samsung Biologics, a Cheil subsidiary, inflating its worth by more than 4 trillion KRW (2.88 billion USD) to boost Cheil’s value before the merger.{vi19}){vi20})Lower courts rejected these arguments. In February 2024, a district court acquitted Lee of all 19 original counts. The appellate court upheld the acquittals in February this year, including additional charges for a total of 23 counts, prompting prosecutors to take the case to the Supreme Court.{vi21}){vi22})Following the ruling, Samsung’s legal team expressed gratitude to the Supreme Court for its “wise judgment after five years of thorough review.” They stated that the ruling confirmed the legitimacy of the Samsung C&T merger and Samsung Biologics’ accounting practices.{vi23}){vi24})With legal distractions now behind him, Lee is expected to pursue aggressive investments in high-tech sectors to reinvigorate the tech giant.{vi25}){vi26})Since his acquittal earlier this year, Samsung and its affiliates have already announced three significant deals. In May, Harman International agreed to acquire the U.S.-based Masimo’s audio business for 350 million USD. That same month, Samsung inked a 1.5 billion EUR (1.74 billion USD) deal to purchase German HVAC company FlaktGroup, marking its largest takeover in about eight years. Most recently, the company unveiled plans to acquire U.S.-based healthcare firm Xealth.{vi27}){vi28})Lee now faces the challenge of reviving Samsung’s lackluster earnings and catching up with rivals in the crucial AI chip sector.{vi29}){vi30})The company projects its second-quarter operating profit to reach around 4.6 trillion KRW (3.33 billion USD), a 55.9 percent drop from a year earlier. Analysts attribute this decline to sluggish chip businesses, particularly amid supply delays of AI-critical high bandwidth memory (HBM), as well as the impact of U.S. tariff policies.{vi31}){vi32})On Thursday, business groups welcomed the court’s decision, expressing optimism about Samsung’s and the national economy’s growth prospects.{vi33}){vi34})”In this era of fierce global competition in high-tech industries, we expect this decision to not only mitigate management risks for the company but also generate positive ripple effects across the Korean economy,” said Kang Seok-koo, head of research at the Korea Chamber of Commerce and Industry.{vi35}){vi36})Lee Sang-ho, head of economic policy at the Federation of Korean Industries, added that the verdict would allow Samsung to focus on “technological innovation and securing global competitiveness.”{vi37}){vi38})The Korea Enterprises Federation echoed this sentiment, expressing hope that “under Chairman Lee Jae-yong’s strong leadership, Samsung Electronics will secure a competitive edge in the global market through more proactive investments and technological innovation,” while laying the groundwork for economic growth through new business ventures and job creation.{vi39}){vi40})