Lee Jae-yong was sentenced on Friday to five years in prison for bribery charges in collusion with the South Korean government and ex-President Park Geun-hye. A judge ruled against the Samsung Group heir and his action to gain more control over his family conglomerate.
The ruling is worrisome for business dynasties in the Asian country, commonly known as “chaebol.” These groups controlled by the same families generation after generation include LG and Hyundai, and they contribute a lot to the economic growth of South Korea in spite of their questionable activities.
Analysts have predicted the verdict of Judge Kim Jin-dong won’t have any real effect on Samsung’s operations, particularly since the de-facto leader of the multibillion business has been detained since February this year without any significant impact.
What were Lee Jae-yong’s crimes?
South Korean justice found Lee guilty on charges of bribery, embezzlement, corruption, and hiding assets overseas. His most notorious crime, however, was bribing former President Park Geun-hye for her to approve a merger move that would get him a better grip of his multiple companies.
The ex-mandatary was not directly implicated but received tens of millions of dollars in “donations” from Samsung through a close friend of hers, Choi Soon-sil, who ran different non-profit foundations in the country.
Samsung also sponsored Choi’s daughter and her career as a professional equestrian. Chung Yoo-ra received a horse and an undisclosed amount of money from the tech giant and went on to win gold at the 2014 Asian Games in her sports category.
Speculators are betting Jay Y. Lee's sister will take charge of Samsung now he's been jailed https://t.co/7faysPX8ad pic.twitter.com/ZqGvhaUhEt
— Bloomberg (@business) August 25, 2017
What does this mean for South Korea and other chaebols?
For Samsung workers, it probably won’t mean much that Lee Jae-yong will spend five years in jail. The president and executive vice-president of the company were also charged during the trial, but his offenses only granted them suspended sentences that will allow them to continue fulfilling their roles.
As for South Korea, Lee’s impending imprisonment represents a substantial departure from the traditional way of handling justice in the country. Under president Moon Jae-in, a corrupt “chaebol” crackdown is expected.
The new leader has said he will grant no more pardons to white collar criminals; a common occurrence during previous administrations. High-ranking officials from world-leading South Korean companies only got a slap on the wrist if they were caught making shady business.
Lee’s father, Lee Kun-hee, was himself charged twice and pardoned both times by national leaders at the time. He suffered a heart attack in 2014 that forced him to hand over control of the Samsung Group to his son, who recently turned 49.
Jay Y. Lee, as he is also known, has two sisters that might step in to fill his shoes once he is gone behind bars. Other family conglomerates should be wary of the prospect of serving actual time in prison and tread lightly on their foul businesses with other parties.