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Samsung chair Lee Jae-yong has secured a major legal victory with an appeals court clearing him of long-running accounting fraud and stock manipulation charges, allowing him to focus on turning around the group’s struggling chip business.
The billionaire heir to South Korea’s biggest conglomerate has been dogged by legal troubles for a decade, since his father and the former chair Lee Kun-hee suffered a heart attack in 2014 and died in 2020. But Monday’s ruling by the Seoul High Court to uphold an earlier decision by a lower court removes long-standing legal risks stemming from the controversial 2015 merger of two Samsung units.
Prosecutors had been seeking a five-year jail term for Lee, accusing him of manipulating the stock price of Samsung C&T and Cheil Industries to facilitate the merger, seen as a crucial move to cement his control of the group’s crown jewel Samsung Electronics. He was also accused of orchestrating a $3.9bn accounting fraud at the group’s biopharmaceutical unit to manipulate the merger ratio to his benefit.
But Seoul High Court on Monday rejected prosecutors’ allegations, saying the merger was done for business purposes and there was no intentional accounting fraud at Samsung Biologics. A final appeal by prosecutors to the Supreme Court is seen as unlikely.
Lee’s legal representatives welcomed the verdict. “It has been a very long time since the investigation and trial of the case began,” said lawyer Kim You-jin. “We hope that, with this verdict, the defendants can now focus on their work.”
The ruling comes at a critical time for Samsung, which has been under pressure over its underperformance in advanced memory chips. Its shares have lost more than a third of their value over the past six months as it has admitted to losing its technological edge in semiconductors. It has lagged behind smaller rivals SK Hynix and Micron Technology in high-bandwidth memory chips used in artificial intelligence hardware. Samsung is yet to supply advanced HBM chips to the leading AI player Nvidia.
The company’s operating profit fell about 30 per cent in the October-December quarter compared with the previous quarter as commodity chip prices continued to fall. But SK Hynix reported record earnings in the fourth quarter, thanks to its large exposure to high-margin HBM.
Samsung and Lee’s advocates have said his legal problems are partly behind the group’s weakening competitiveness and failure to make large acquisitions.
In his final legal hearing in late November, Lee pleaded for a chance to “overcome the current difficulties Samsung is facing and take a step forward”, citing growing concern over Samsung’s future amid growing geopolitical risks and tech challenges.
Samsung has been sitting on a cash pile of more than $100bn, avoiding major deals since its $8bn takeover of US auto tech group Harman in 2016, despite growing pressure to find new growth drivers beyond chips and smartphones.
Sangin Park, economics professor at Seoul National University, said his ability to refocus on management now was unlikely to lead to any rapid turnaround.
“The court verdict seems to have been affected by the general economic and social atmosphere,” he said. “The economy is bad and Samsung seems in crisis, with growing concern over US tariffs. It is time for Samsung to reinvent itself, shaking off its past business practices. But Lee doesn’t seem to be able to overcome the current crisis, regardless of his legal trouble.”
