South Korean prosecutors laid out their case against Samsung Electronics Co vice chairman Jay Y Lee by outlining how a top presidential aide documented instances of alleged bribery in the pages of 39 handwritten notebooks.
That surfaced during Lee’s first court appearance in a trial at the centre of one of South Korea’s largest-ever graft scandals, which cost President Park Geun-hye her job and highlighted the murky nature of government-corporate relationships. The billionaire heir to the Samsung group is fending off accusations of corruption just as its largest Corp is trying to regain ground lost to Apple Inc during 2016’s Note 7 recall debacle.
Wearing a gray suit without a tie, Lee listened calmly as prosecutors took an hour to outline charges against him. Prosecutors said notebooks from An Chong-bum, a former chief secretary for economic affairs and policy coordination, backed claims that the tycoon ordered money funnelled to a friend of Park’s. Those funds, portrayed as donations, were intended to secure government backing for a pivotal 2015 merger that shored up Lee’s control of Samsung Electronics, they said.
“The essence of this case is, simply put, the chronic and typical collusion between government and business in our society,” special prosecutor Park Young-soo, who spearheaded the pre-trial investigation into Samsung and Lee, said as the hearing began.
Lee declined to speak in his own defence on Friday. But his lawyers maintained that the prosecution had yet to show categorically that the tycoon asked for specific favours when he met with President Park. Lee felt he couldn’t turn down the demands of the country’s most powerful person, but didn’t know the donations could go to her friend, his lawyers argued.
Hearings will resume on April 13. Dubbed the “trial of the century,” the proceedings now underway threaten to expose a complex web of ties between the government and the nation’s largest corps, and have cast uncertainty over succession at South Korea’s biggest conglomerate. Detained outside the capital since February, Lee must win the trial to resume guiding a $260bn corp trying to salvage its reputation after a series of exploding phones forced the eradication of the marquee Note 7 line. Friday’s hearing at Seoul’s Central District Court coincided with the release of Samsung’s best quarterly earnings in almost four years. The world’s largest maker of smartphones reported a better-than-projected 48% rise in operating income to 9.9tn won ($8.7bn) for the March quarter, fuelled by robust sales of memory chips and displays. The trial also overshadowed the start of pre-orders in Korea for the S8 – Samsung’s answer to Apple Inc’s iPhone.
“As long as Lee is locked up, it won’t be easy for Samsung to restore its reputation completely,” Koo Chang-hwan, chief of the Korea Reputation Center, said before Friday’s hearing began. “Both at home and abroad, there’s nothing worse than menacing woes surrounding a” corporate leader.
The broader electronics-to-energy Samsung group has been in transition since Lee’s father suffered a crippling heart attack in 2014. The prolonged absence of its de-facto head may further delay major decisions. Still, the company has said it’s got a strong management team in place to run the business. And the company’s shares have risen about 16% this year, about three times the gain in the benchmark KOSPI. On Friday, the stock was little changed.
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