Days after a largely positive launch of the Galaxy Note 8, the head of Samsung has been sentenced to five years in jail.
Lee Jae-Yong, who has been in charge of the company since his father suffered a heart attack in 2014, was found guilty of bribing the South Korean government. The heir to the empire has been embroiled in the scandal, which saw the impeachment of the country’s president, since last year. His father remains in hospital, making Lee the de facto leader of the electronics giant.
South Korea’s bribery scandal takes another turn. Could it bring Samsung to its knees?
A court in South Korea agreed with prosecutors that Lee had offered to pay government officials during a time they were agreeing a merger between two Samsung-owned companies. The deal led to Lee taking a greater control of Samsung Electronics.
It was alleged Lee had given donations of 41 billion won (£29 million) to organisations operated by a friend of then president Park Geun-hye. According to Bloomberg, Samsung provided an $800,000 (£624,000) racing horse to the daughter of Park’s friend, Choi Soon-sil.
Lee denies the charges and his legal team says it will appeal the case. In February, when Lee was arrested, Samsung said it would “do our best to ensure that the truth is revealed in future court proceedings”. In a separate trial former president Park has pleaded not-guilty to charges of corruption and non-doing.
Samsung is the biggest company in South Korea and has more than 325,000 employees across 78 different companies. Its financial documents for the end of 2016 showed it had $226,044,667,000 in assets.
The company, like many major firms in South Korea, is family run. They’re referred to as chaebols, and others in the country include the Hyundai Motor Company and LG. Speaking at the start of the year, analysts said it is unusual for the leaders of chaebols to criticised or punished by state officials as they have been seen as large drivers of the country’s economy in recent years.
“Samsung is hugely important to Korea’s economy,” Daniel Gleeson a senior analyst at Ovum said at the time. “Any significant instability or break up of Samsung would have a significant impact on the economy, but also to the culture and political landscape in Korea.”