The Seoul Central District Court found Lee Jae-Yong guilty of offering bribes to Park Geun-Hye when she was South Korea's president, and to Park's close friend, in order to garner government support for his efforts to gain control over the Samsung empire. This scheme created public outrage which contributed to Park's removal.
Lee was found guilty of embezzling Samsung funds, hiding assets overseas, concealing profits from criminal acts and perjury. Experts say the verdict won’t have an immediate effect on Samsung's business operations, but long-term business decisions may have to be put on hold because there’s the potential for a destabilizing family feud over inheritance when the elder Lee dies. Samsung accounts for about 20% of South Korea's exports.
Lee was charged with offering $38 million in bribes to four entities controlled by Choi Soon-Sil, a long-time friend of Park. This was in exchange for government help with a merger that strengthened Lee's control over Samsung after his father suffered a heart attack in 2014.
Samsung hasn’t denied transferring corporate funds, but Lee, vice chairman at Samsung Electronics and the Samsung founder's grandson, said he was innocent in the court proceedings. He claimed that he was unaware of the foundations or the donations, which were overseen by other executives.
The verdict is the latest in a political scandal that prompted millions of South Koreans to protest. Last fall, this resulted in the ouster and arrest of Park as well as the arrests of Choi and Lee. Park, who also was involved in other scandals, was removed from office in March. Park and Choi are both currently on trial.
The verdict of the younger Lee also has an impact on Samsung's publicly-stated position that recent business dealings or restructuring efforts don’t have anything to do with the succession of corporate leadership to Lee from his father.
The company insists that a merger of two Samsung companies at the center of the scandal was about creating business benefits, but the judges rejected Samsung's argument.
"He was set to benefit most from the succession work, which was part of the favors sought from the president," the head judge said.
Reference: USA Today (August 25, 2017) “Samsung heir sentenced to 5 years prison by South Korea court”