S. Korea prosecutor seeks arrest of Samsung’s Jay Y. Lee

Jay Y. Lee, co-vice chairman of Samsung

Prosecutors are seeking a warrant to arrest Samsung Group’s Jay Y. Lee for allegations including bribery and embezzlement, a stunning turn for the scion of South Korea’s richest family groomed for decades to take over the company from his father.

Lee, 48, the de facto head of the Samsung Group and vice chairman of Samsung Electronics Co., is accused of participating in payments that Samsung made to a close friend of South Korean President Park Geun-hye in exchange for government support in the company’s succession planning. A court will still have to determine whether to approve the warrant, which was announced by prosecutors in a briefing yesterday. A hearing is scheduled for tomorrow.

A special prosecution team was established in December to investigate whether Samsung and other chaebol business groups contributed money to Choi Soon-sil, the Park confidant, in exchange for political favors. President Park has been already impeached and her powers suspended. Samsung shares, which have been near record highs, fell 2.1 percent to 1,833,000 won at the close in Seoul.

“We believe that there was an illegal request made by Samsung in facilitating the process of business succession,” Lee Kyu-chul, a spokesman for the prosecutor’s office, said in the briefing. The arrest warrant would let prosecutors continue their probe while Lee is detained. Formal charges and an indictment would follow. The total amount of bribes, including promised funds and money embezzled is alleged to be about 43 billion won (USD36 million), Lee said.

Samsung denied the company provided financial aid in return for any favors. “We can’t accept the prosecutor’s argument that we made illegal requests associated with the merger and management succession,” Samsung Group said in a statement. “We believe the court will make a wise decision.”

The investigation jeopardizes Lee’s ability to take over Samsung Group and risks further destabilizing the leadership of South Korea’s largest company. His father, Chairman Lee Kun-hee, has been hospitalized since suffering a heart attack in 2014. Samsung is now facing its second crisis in a matter of months, after it was forced to pull the Note 7 smartphone off the market last year because the device was catching fire. Jungah Lee, Hooyeon Kim, Bloomberg