Special prosecutor team requested an arrest warrant on Vice-Chairman Lee Jae-yong of Samsung Electronics to a court. Regarding this, Samsung immediately said that there weren’t any illegal requests and compensations. Samsung Group is facing its first ever absence of current CEO while court still has to go through substantive examination on warrant. This has made personnel change, reorganization, investments in future driving forces, and decisions on M&A difficult. Special prosecutor team is planning to continue its investigations on leaders of other businesses followed by Samsung.
Special prosecutor team led by Park Young-soo charged preliminary arrest warrant on Vice-Chairman Lee Jae-yong of Samsung Electronics on the 16th regarding suspicion of giving bribes, embezzlement, and perjury on National Assembly. Special prosecutor team believes that Vice-Chairman Lee gave Choi Soon-sil $36.3 million (43.0 billion KRW) in response to receiving government support for M&A of Samsung C&T and Cheil Industries Inc.
Samsung is in a state of emergency. Although court still needs to go through substantive examination, it is unclear whether or not the warrant will be dismissed as of right now. Decision by court will be made on the 18th at the earliest.
If Vice-Chairman Lee is placed under arrest, it will disrupt group’s personnel change and reorganization that have been pushed to this year. Samsung is also facing stoppage of reorganization of structure of Samsung Group such as changing its holding companies and cannot avoid management absence when it establishes medium and long-term business plans. It is also going to be neglectful on preparation of Industry 4.0.
Absence of an owner is likely to impact Samsung Group from taking over Harman. Recently Harman’s minority shareholders filed class action against Harman’s management. Normally Vice-Chairman Lee needs to persuade these shareholders. However even this seems impossible at this rate.

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<Special Assistant Prosecutor Lee Kyu-cheol who is a spokesperson for special prosecutor team led by Park Young-soo, announced team’s plan to charge arrest warrant on Vice-Chairman Lee Jae-yong of Samsung Electronics at a pressroom on the 16th. Staff Reporter Park, Jiho | jihopress@etnews.com>

It seems that this will also affect Samsung’s work on M&A, which has been developing for recent years in order to secure future driving forces. Samsung Electronics had carried out M&A with global businesses such as LoopPay, SmartThings, VIV Labs, Joyent, and Harman for past two to three years and invested its shares into tens of businesses. It is working on future businesses such as Samsung Pay, IoT, and electronic components with companies that it took over. However if Vice-Chairman is placed under arrest, Samsung Group needs to carry out conservative management due to absence of decision maker.
Other businesses are becoming more worried about this situation as SK and Lotte, which are expected to go through investigations from the special prosecutor team after Samsung Group, are observing this situation very carefully. Possibility of impact of the special prosecutor team’s investigations on entire financial world also cannot be ignored.
“I am not sure if this is an issue that requires arrest of the leader of a company that represents South Korea.” said a representative for a financial industry. “It feels like the special prosecutor team is going after companies that are easy to handle rather than investigating former Chief Secretary Kim Ki-choon or former Senior Secretary Woo Byeong-woo for Civil Affairs who are the main people of this situation.” This representative also added by saying that it is worrisome that South Korean economy will lose driving forces.”
Samsung has put out its official stance by saying that it is expecting accurate judgment from a court.
“It is difficult to understand decisions made by the special prosecutor team. We have never given support hoping to receive compensation in return.” said Samsung. “It is difficult for us to accept special prosecutor team’s claim that Samsung had made illegal requests regarding M&A or succession of Vice-Chairman Lee Jae-yong on management rights.”
Staff Reporter Kwon, Keonho | wingh1@etnews.com & Staff Reporter Sung, Hyeonhee | sunghh@etnews.com