Samsung heir faces further questions over bribery scandal

Samsung heir faces further questions over bribery scandal

Samsung's de facto leader back in the spotlight

Credit: Dreamstime

It would appear that Samsung’s rocky start to the year is not yet over, with the company’s vice-chairman, Lee Jae-yong, reportedly facing further questions by South Korean prosecutors as part of a major bribery scandal investigation.

Lee, also known as Jay Y. Lee, faced questions at the South Korean special prosecutor’s office on 13 February, according to a report by Reuters.

The appearance by Lee at the prosecutor’s office follows the dismissal in January of a warrant for the Samsung heir’s arrest over allegations of bribery and embezzlement.

Lee had been questioned by authorities for more than 20 hours the previous week, in relations to allegations that he played a part in payments made by Samsung to a friend of South Korea’s embattled president, Park Geun-hye, to help garner government support in the company’s succession planning.

Lee’s latest appearance at the prosecutor’s office is part of a wider investigation into the scandal, which could potentially see the country’s president lose her office. She is currently facing impeachment proceedings, and had her powers suspended.

According to Reuters, the special prosecutor has accused Lee of allegedly pledging 43 billion won ($48.7 million) to organisations backed by a friend of Park in exchange for the support of a merger between two Samsung companies in 2015.

Lee, Park and Park’s friend have all denied the bribery allegations.

The South Korean authorities’ continued focus on Lee has the potential to throw the future leadership line-up of Samsung and its diverse array of subsidiary businesses into question.

Lee, in his capacity as the conglomerate’s vice-chairman, has been seen as the company's de facto leader since his father, Lee Kun-hee, was hospitalised in 2014 after suffering a severe heart attack.

If Lee finds himself involved in a drawn-out legal battle with the Korean government, the company could potentially end up facing a leadership vacuum that may give investors cause for concern.

As it is, there has been unrest among some of the technology giant’s shareholders, with a push last year by activist hedge fund, Elliot Management, for the company to restructure in a bid to unlock investor value.

Samsung subsequently confirmed it is considering splitting itself into two separate entities and undertaking new public offerings in effort to appease shareholders.

At the same time, the company has been working feverishly to mop up the fallout from its Galaxy Note7 debacle, which saw the company recall millions of its flagship smartphone model after battery problems caused some units to catch fire.

In January, the company revealed the results of a four-month internal investigation, as well as concurrent investigations by three other industry organisations, into the company’s issues with the Note7.

The findings revealed that irregularities in the manufacturing of not one, but two of the batteries Samsung sourced for the troubled Galaxy Note7 flagship smartphone were behind the device’s overheating problems.

“Our investigation, as well as the investigations completed by three independent industry organisations, concluded that the batteries were found to be the cause of the Note7 incidents,” the company said at the time.

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