The heir and de facto leader of family-owned conglomerate Samsung Electronics was indicted by South Korean prosecutors Tuesday on charges related to a 2015 merger of two subsidiaries and alleged irregularities in accounting practices at another subsidiary.
Lee Jae-yong, also known as Jay Lee, is accused of unfair transaction and manipulation of market prices under South Korean’s Capital Markets Act; breach of trust during the course of business; and false disclosure and accounting fraud under the External Audit Act, prosecutors from the Seoul Central District Prosecutors’ Office said in a Reuters story.
Lee’s attorneys denied the allegations in statements made to multiple media outlets.
Prosecutors are probing the $8 billion merger in 2015 of Samsung C&T Corp. and Cheil Industries, which allowed Lee to expand his control of Samsung Group. The merger has been criticized for harming minority investors, according to Forbes.
The accounting fraud charge revolves around irregularities at a subsidiary, Samsung Biologics.
Also indicted Tuesday were 10 other former and current Samsung Group officials, according to The Korea Herald. Among those indicted were current Samsung Group officials Lee Young-ho, who heads Samsung C&T; Choi Chi-hoon, head of Samsung C&T’s board of directors; and Kim Tae-han, CEO of Samsung Biologics.
Lee will not be arrested as part of the indictment but will be expected to stand trial at a later date, the Wall Street Journal reported.
Compliance challenges laid bare
Lee held a rare press conference in March during which he admitted the company “has not strictly complied with laws and ethics.” The admission was apparently prompted at the urging of a corporate compliance oversight committee established earlier this year to help clean up Samsung’s tarnished reputation. The committee, created by a South Korean judge amid an ongoing bribery case against Lee and other key executives, advised Lee to concede and apologize about past wrongdoings.
Samsung has been embroiled in a number of scandals in recent years, including allegations that Lee and other Samsung executives bribed South Korean president Park Geun-hye, who was later impeached and ousted for abuse of power. Lee was convicted on charges connected with bribing the former South Korean president and a top aide and served a year in jail.