Heir to South Korea's Samsung Group Charged in Corruption Scandal

Samsung Electronics' executive vice-president, Hwang Sung-soo, was also charged.

The heir apparent to South Korea's enormous Samsung conglomerate will be indicted on charges of bribery, special prosecutors said Tuesday, as a sensational corruption scandal revolving around the country's president reaches its climax. The trial might take down Korea's President Park Geun-hye, too.

The merger helped Lee, the billionaire vice chairman, promote a father-to-son transfer of leadership and wealth at the group. She would be the country's first democratically elected leader to be ousted from office. If parliament's impeachment of Park is upheld, an election could be held in two months. The b?ribes totaled 43 billion won ($38 million), assistant independent counsel Lee said. Samsung has denied wrongdoing.

The news of the formal charges against the five has had little immediate effect on the markets, with Samsung shares ending slightly higher on Tuesday.

The charges further unsettle a company grappling with Lee's prosecution. The stock rose 1 percent on Tuesday to 1,922,000 won at the close in Seoul, compared with a record 1,995,000 won on January 26. Ratings agencies say they do not expect any impact on the flagship firm's credit ratings, saying Lee's arrest could accelerate improvements in management transparency and corporate governance. After his father had a heart attack, Lee the younger became the de facto head of Samsung.

Shortly after the prosecutors' announcement, Samsung announced a series of measures to improve its transparency, including dismantling its corporate strategy office, the nerve centre of operations for the sprawling conglomerate. However, major business groups criticised the arrest, concerned about the impact on Samsung and, more broadly, on South Korea. It is to be noted that Korean President Park Geun-Hye was impeached in this case.

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His colleagues face similar charges except for the perjury count.

"Jay Y. Lee's main role was largely limited to a few things, such as building a good image of Samsung as the owner of the conglomerate, establishing solid network with his global counterparts and calling the final shots when cutting big acquisition deals in new growth areas", CEOSCORE'S Park said.

Park was named as a co-conspirator in her associates' alleged extortion of money from conglomerates by prosecutors previous year.

He continues to claim that the millions of dollars in "donations" Samsung paid were coerced, the Times reports.

The merger, despite opposition from some shareholders who argued that it unfairly benefited the Lee family, was approved by shareholders thanks to the support of a state-controlled national pension fund, a key Samsung investor.

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