South Korea wants to arrest Samsung's vice chairman on bribery and embezzlement charges

Lee Jae-Yong, vice chairman of Samsung arrives at the office of the independent counsel on January 12, in Seoul, South Korea. Photo by Chung Sung-Jun/Getty Images

Shares in electronics giant Samsung have slumped on Monday, falling 3% on news that South Korean special prosecutors are seeking a warrant to arrest Samsung Group’s vice chairman Lee Jae-yong on charges that include bribery and embezzlement.

According to Bloomberg, citing a statement from the prosecutors office, Lee 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.

While Lee is Samsung’s current vice chairman, he is essentially de facto head of the company given his father, chairman Lee Kun-hee, has been hospitalised since 2014 after suffering a heart attack.

Prosecutors said it was more important to uphold justice after taking into account the potential negative economic impacts of the arrest of Lee. They also said that there was considerable evidence that Lee directed bribes to Choi Soon-sil, a close friend of South Korean president Park Geun-hye, is suspended from office ahead of impeachment proceedings.

Choi, 60, currently on trial over charges of coercion and attempted fraud, denies any wrongdoing. She stands accused of colluding with Park to pressure companies, including Samsung to donate to the president’s charities.

Authorities allege Samsung gave Choi a horse for her 20-year-old daughter, Chung Yu-ra, as well as riding lessons. The horse, Vitana V, is worth an estimated $US830,000 (£680,000).

South Korea issued an arrest warrant for Chung in December for obstruction of justice after she refused to return from Germany to appear before a parliamentary inquiry. She was arrested on January 1 this year in Denmark.

In 2015, Reuters reported that Samsung paid $US18 million (£14.8 million) to a consulting firm owned by Choi Soon-sil, which in turn offered an equestrian team an $8 million (£6.6 million) sponsorship. Chung is a member of the team.

The tech giant is accused of giving millions to charities set up by Choi Soon-sil. The alleged bribery involved is estimated to be worth 800 billion won ($US847 million).

Prosecutors also allege that Samsung sought political favours in the controversial 2015 merger of its de facto holding company Cheil Industries Inc with Samsung C&T Corp, its construction arm.

Samsung executives were questioned last Monday over the growing corruption scandal, including corporate strategy office vice chairman Choi Gee-sung and president Chang Choong-ki.

The merger went ahead despite significant shareholder opposition.

According to Reuters, Samsung has said it does not accept allegations it sought to curry favour with officials to approve the merger. The company denies it made any payments expecting anything in return, adding that it was difficult to understand why prosecutors were seeking Lee’s arrest.

The arrest warrant for Lee came on the same day that South Korean prosecutors indicted Moon Hyung-pyo, chairman of the nation’s National Pension Service (NPS), on charges of abuse of power and giving false testimony.

According to Reuters, Moon was arrested last December after he acknowledged ordering the world’s third-largest pension fund to support the $US8 billion merger of two Samsung Group affiliates while he was head of the health ministry, which oversees the NPS.

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