The Conviction of Samsung’s Jay Y Lee Should Send Shudders Through Big Tech

Jay Y. Lee

Photographer: Chung Sung-Jun/Getty Images

Jay Y. Lee, vice chairman of the Samsung Group and heir to the helm of the largest technology company in Asia, might be spending the next five years in jail. On Friday, in a stunning denouement to a six-month long trial that captivated South Korea, he was convicted of bribery and embezzlement. His lawyers vowed to appeal the verdict.

The outcome says a lot about South Korea and its strained relationship with its largest companies, called chaebol. But it might say even more about how political sentiment around the world has turned against big tech companies, which for years have enjoyed widespread support and an almost mythological place in the public imagination.

In case you haven’t followed the daily coverage from my colleague Sam Kim or our July Businessweek cover story on the topic, Jay Y. Lee and four other Samsung executives were on trial for using bribes to solicit government influence to approve a merger between two Samsung Group subsidiaries. The combination had the secondary effect of strengthening the Lee family’s control over the entire consortium of 60-some Samsung companies, including the crown jewel, Samsung Electronics.

Remarkably, prosecutors never produced a smoking gun that demonstrated that Samsung’s contributions to South Korea’s Olympic fund and its donations to a presidential confidante amounted to an illegal quid pro quo for merger approval. Lee also testified emotionally, if a bit dubiously, that even as the boss, he had no idea what was going on and had limited insight and authority over business decisions.

Nevertheless, Judge Kim Jin-dong, who presided over a three-judge panel, said that there was enough circumstantial evidence to suggest an unholy alliance between the government and Samsung. “The people’s disappointment seemed irreparable because the corrupt alliance between the president and the conglomerate existed not just in the past but in our present reality,” he said in the verdict.

The statement and its emphasis on public sentiment suggested the obvious – that the blockbuster verdict was as much a political judgement as a legal one. Lee’s trial coincided with the impeachment of former South Korean president Park Geun-hye and the election of President Moon Jae-in, another “drain the swamp” candidate who won office this year on a progressive agenda that harnessed the dissatisfaction Korean citizens feel over widening income equality and the unevenly distributed benefits of the tech boom. South Koreans, now feeling disfranchised by companies like Samsung, basically demanded prison time for Jay Y. Lee.

That might provide some comfort to Lee for his prospects at appeal. But it’s not good news for the tech industry in general. Though there’s a vastly different political environment in the U.S., President Donald Trump has also gone after big tech companies like Amazon for evading taxes, Apple for outsourcing jobs and Google for supporting net neutrality.

Such tech giants now have the potential to find themselves the target of the same populist rage that descended on Samsung over the last year. Some of this is irrational—people and politicians blaming handy scapegoats for intractable problems. But tech companies must also wrestle with their glaring hypocrisies: they claim to be job creators, though their brutal efficiencies are likely responsible for eliminating jobs; they claim they generate economic activity, though they expertly evade paying corporate taxes; and they create platforms to foster innovation, while also using their massive financial might to either eliminate startups or acquire and silence them.

To be sure, the complex relationship between Samsung and South Korea is unique. But the broad, undefined rage that led to the conviction of Jay Y. Lee is not, and tech chieftains must take notice or risk falling victim to it themselves.

Sign up to receive the Fully Charged newsletter in your inbox, and follow Bloomberg Technology on Twitter and Facebook for more.

And here’s what’s happening in global tech: 

Uber gets a new CEO. The ride-sharing company’s board picked Expedia’s Dara Khosrowshahi after meeting with several candidates over the weekend for a last round of interviews. The decision caps a tumultuous two-month search plagued by leaks, boardroom infighting and a lawsuit involving two directors.

There’s a thriving black market associated with the hit game Honour of Kings, where seasoned players can help newbies rise the ranks. 

An Australian company is selling its own version of bitcoin so that homeowners and business owners can sell energy generated from their solar panels. 

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