A Tougher Climate for Corporate Pardons Faces Samsung's Lee

  • Samsung’s heir-apparent Jay Y. Lee arrested in bribery probe
  • Previous chaebol heads have spent little or no time in jail

If Jay Y. Lee, the de facto head of South Korea’s largest conglomerate, is convicted on bribery charges, he would join a long list of chaebol executives sentenced to jail time including his father, who twice faced imprisonment.

Samsung Group’s Lee was formally arrested on allegations of bribery, perjury and embezzlement Friday, an extraordinary step that jeopardizes his ascent to the top role at the world’s biggest smartphone maker. Convicted executives of the family-run conglomerates that dominate business in Korea often get their sentences reduced or suspended -- and eventually a pardon from the president. On that basis, Lee, who’s denied the allegations, might not be expected to spend much time in jail.

But a long-time chaebol observer said the situation is different this time around. With growing discontent surrounding the conglomerates, Lee may not be afforded the same breaks. The billionaire was arrested in connection with an influence-peddling scandal that has seen President Park Geun-hye impeached and millions of South Koreans take to the streets to demand changes.

“Considering the current public sentiment, it would be hard for Lee to be pardoned,” said Park Ju-gun, president of corporate watchdog CEOScore in Seoul. “If the next administration grants an amnesty to Lee, it would be a fatal blow to government ethics. It’s not feasible.”

Here are some of the more notable cases:

  • Lee Kun-hee, Samsung Group chairman and Jay Y.’s father, was convicted twice, once for tax evasion in 2008 and for bribery in 1996. He was given a suspended three-year prison sentence for tax evasion (later pardoned by President Lee Myung-bak) and a suspended two-year prison term for bribery.
  • Chung Mong-koo, Hyundai Motor Group chairman, was convicted of embezzlement and breach of duty in 2007. He was given a suspended three-year prison term. Chung was detained for almost two months following his arrest in April 2006, before he was released on bail and pardoned by President Lee Myung-bak.
  • Chey Tae-won, SK Group chairman, was jailed twice. He was sentenced to four years in prison in 2012 for embezzling corporate funds but was pardoned in 2015 by President Park. In 2003, he was sentenced to three years before he was pardoned in 2008.
  • Lee Jay-hyun, CJ Group chairman, was sentenced to four years in 2014 for embezzlement, breach of fiduciary duty and tax evasion before that was eventually reduced to two-and-a-half years. Lee, who is Jay Y.’s cousin, has been in and out of jail during that period because of complications stemming from a kidney transplant in 2013. President Park Geun-hye pardoned Lee in August 2016.
  • Kim Seung-youn, Hanwha Group chairman, was convicted at least twice, once for embezzlement in 2012 for which he was sentenced to four years, and for assault in which he received an 18-month sentence in 2007. Both sentences were suspended. He received a pardon for his assault conviction from President Lee Myung-bak in 2008.

Read this: QuickTake on South Korea’s chaebol.

Lee has been the de facto head of Samsung with his father hospitalized since 2014. Yet investors in Samsung have been surprisingly sanguine. After a strong earnings report in January, Samsung Electronics shares surged to an all-time high.

As with most chaebol, the Lee family historically hasn’t been that involved in day-to-day operations, leaving those responsibilities to trusted lieutenants. In the case of Samsung Electronics, there are three co-chief executive officers who continue to look after the businesses.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE