S.Korea’s most prominent business leader returns with all charges cleared

After nearly a decade spent fighting allegations of corporate wrongdoing, Samsung Electronics Co. Chairman Lee Jae-yong has been acquitted on all charges of accounting fraud and stock manipulation, removing what the country’s business community sees as one of the most prominent judicial shackles in its recent corporate history.

The Supreme Court on Thursday upheld Seoul High Court’s ruling in February, dismissing all charges related to the merger of two Samsung affiliates in 2015, which prosecutors said was designed to tighten his control of Samsung Group, the country’s top conglomerate.

Thirteen former senior Samsung executives, who were indicted by the prosecution at the time on similar charges, were also acquitted of the criminal charges against them.

In January 2024, Lee was found not guilty by a lower court of criminal charges related to the $8 billion 2015 merger between Samsung C&T Corp. and Cheil Industries Co.

The Samsung chairman, widely known in international business circles by his English name Jay Y. Lee, denied any wrongdoing.

Prosecutors, however, appealed to the Seoul High Court, seeking a five-year jail term, citing a separate ruling in August that said Samsung Biologics Co., an affiliate of Cheil Industries, breached accounting standards by overstating its assets to justify the merger.

On Thursday, the Supreme Court dismissed the prosecution’s claims as speculative, citing a lack of evidence.

The court also ruled that the alleged accounting fraud involving Samsung Biologics and Samsung Bioepis Co. “cannot be regarded as fraudulent.”

SAMSUNG WELCOMES THE RULING

“Today’s final ruling confirms that the Samsung C&T merger and Samsung Biologics' accounting handling were legal,” Lee’s legal team said in a statement.

The ruling offers Samsung long-awaited breathing room at a time when its global position has eroded.

Lee has been plagued by legal challenges for years, raising investor concerns over the future of Samsung Group as it has struggled amid growing competition with rivals.

Samsung faces an uphill battle against Taiwan Semiconductor Manufacturing Co., better known as TSMC, in the foundry or contract chipmaking business; crosstown rival SK Hynix Inc. in the advanced AI chip sector, including high-bandwidth memory (HBM); and Apple Inc. in the high-end smartphone segment and Chinese competitors such as Xiaomi and Huawei in budget smartphones.

LEGAL ORDEAL

Since 2016, he has appeared in court 186 times and spent a total of 565 days behind bars.

His legal troubles began during a political scandal that led to the impeachment of then-President Park Geun-hye. Though initially imprisoned in 2017, Lee was later released and eventually pardoned in 2022. But the legal aftershocks persisted until this week’s Supreme Court ruling.

“Samsung’s decade-long leadership vacuum couldn’t have come at a worse time,” said a senior Seoul-based fund manager. “While other companies were launching moonshots, Samsung was stuck firefighting and waiting on court rulings.”

Samsung’s market capitalization has risen nearly 50% since the end of 2016, but that pales in comparison to Nvidia – once smaller than Samsung – which has grown to nearly 10 times its size. TSMC, too, has outpaced Samsung in valuation and technological edge.

NEWFOUND FREEDOM, MOUNTING EXPECTATIONS

Now free from the courtroom, Lee faces the daunting challenge of reviving Samsung’s global competitiveness.

Analysts said it will take some years for Samsung to regain its once-formidable technological lead.

“Now that the legal obstacle is cleared, Lee must act decisively,” said a chip analyst in Seoul. “Samsung’s weaknesses in AI, software and advanced chipmaking have to be addressed head-on.”

The conglomerate is already showing signs of acceleration.

Since the appellate court’s acquittal in February, Lee has ramped up overseas activity. He met with key figures, including OpenAI Chief Executive Sam Altman, SoftBank founder Masayoshi Son, and attended the exclusive Sun Valley Conference earlier this week for the first time in seven years.

In March, Lee met with Chinese President Xi Jinping in Beijing as China seeks to attract foreign investment amid escalating trade tensions with the US.

During his China trip, Lee also met with Xiaomi Inc. CEO Lei Jun in Beijing and visited the headquarters of BYD, the world’s largest EV maker, in Shenzhen.

The Samsung leader also resumed major M&A activity, with Samsung acquiring the audio business of US medical tech firm Masimo for $350 million earlier this year.

In May, Samsung purchased FläktGroup, a German manufacturer of heating, ventilation and air conditioning (HVAC) systems, for 1.5 billion euros ($1.7 billion) – Samsung’s first major acquisition since the $8 billion deal to control Harman International Industries Inc. in 2017.

Last week, Samsung acquired Xealth, a US-based healthcare platform provider.

REBUILDING THE MACHINE

Market watchers said Lee will likely undertake major organizational reforms, including establishing a new corporate control tower, restructuring the board, and replacing some affiliate executives to restore internal discipline.

Inside Samsung’s headquarters, questions loom about how Lee will reconfigure the conglomerate’s strategic apparatus.

Since the disbandment of the controversial Future Strategy Office in 2017, Samsung has lacked a clear command center, according to industry watchers.

Company sources said that most of the defunct unit’s activities, except for the construction business, are gradually gaining traction.

Samsung is also expected to actively pursue M&As and make bold investments as it needs to increase its competitiveness in areas such as AI and robots.

Write to Jeong-Soo Hwang, Eui-Myung Park and Chae-Yeon Kim at hjs@hankyung.com

In-Soo Nam edited this article.