Samsung verdict sends tough new message to South Korea Inc.

Samsung verdict sends tough new message to South Korea Inc.

Chairman Lee Jae-yong’s jail sentence for bribery, although subject to appeal, could be a sign that the country no longer will give business leaders political impunity in exchange for economic prosperity.

By CHOE SANG-HUN, JEYUP S. KWAAK and PAUL MOZUR, The New York Times, Aug.25,2017

SEOUL, South Korea — More than two decades ago, South Korean prosecutors indicted the chairman of the powerful Samsung conglomerate on charges of bribing the president. He was let off with a suspended sentence and then a presidential pardon.

About a decade later he was indicted again, on tax evasion and embezzlement charges. And again he escaped prison time.

The message was clear: Samsung was essentially untouchable, and the family that ran the company wielded the true power in South Korea.

On Friday, the country’s courts sent a different message.

Lee Jae-yong, the third-generation heir to the Samsung empire, was sentenced to five years in prison over a bribery scandal that has already contributed to the downfall of the country’s former president and shaken the country’s political and economic foundations.

It was the most remarkable sentence yet for a South Korean business titan, and a sign that the country is no longer willing to offer its business leaders political impunity in exchange for untrammeled economic growth.

Now South Korea and Samsung — the country’s biggest business empire and a global force in the technology industry — are at a turning point. Friday’s verdict could embolden efforts to weaken the hold that major family-run business groups have maintained over one of the world’s most dynamic economies.

“Until now, Samsung had always been considered above the law in South Korea,” said You Jong-il, an economist at the KDI School of Public Policy and Management. “This marks a big stride in establishing judicial justice in the country because it has kept failing before Samsung.”

For Samsung, a vast conglomerate, the verdict offers a test of whether the company can wean itself from the family that founded it and has long used it to amass wealth and power. Lee and other family members could still wield power behind the scenes, say people who study South Korea’s biggest companies, the way some of the country’s other business empires have been run from jail cells.

Lee and four other Samsung executives were convicted Friday of paying $7.8 million in bribes and other inducements to ensure that the country’s disgraced former president, Park Geun-hye, supported a complicated corporate deal. That deal strengthened Lee’s grip on Samsung Electronics, the famous maker of smartphones and televisions, and the conglomerate’s crown jewel.

The verdict could still be reversed on appeal, which Lee’s lawyers have said they will pursue.

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