Mastermind or naive? Samsung heir's fate hinges on the question

He didn't know enough about Samsung or Korean politics to commit crimes he is accused of: Lawyers

The criminal trial of Lee Jae-yong, who controls Samsung, one of the world’s largest corporate empires, has riveted South Korea since it began last spring. Prosecutors have cast him as a mastermind bent on breaking the law to protect his family’s wealth and power. He says he is a detached leader with little knowledge of the inner workings of his own companies.

Now, his fate hinges on which narrative a judge believes.

Lee, Samsung’s de facto leader and the third generation of his family to run the sprawling conglomerate, on Friday faces a verdict in a blockbuster bribery trial. The accusations, which have already sparked the impeachment of South Korea’s former president, have shaken the economic foundations of a country long seen as one of the world’s most successful growth stories. Prosecutors suggest that Lee is sentenced to 12 years in prison.

Lee and his lawyers say that he is innocent — and that he did not know enough about Samsung or South Korean politics to commit the crimes he is accused of. While Lee guides strategy and hammers out global alliances, he has little involvement in day-to-day operations, according to Samsung.

The defense says prosecutors have not produced a smoking gun showing that he directly bribed anybody. That would put greater importance on Lee’s personality and management style: Is he a smart, savvy operator? Or a low-key, hands-off and potentially naïve manager?

Lee — who is known as Jay Y Lee in the West — has said he was naïve.

“In retrospect, I had a lot of shortcomings and didn’t take care of the things that needed to be taken care of, and that’s all my fault,” he told the court earlier this month. “It was my responsibility. I have no excuses.”

Prosecutors are under intense political pressure to win a conviction. The South Korean public has soured on big companies like Samsung, which many believe are holding the country back and are funding political corruption. Many top executives of those companies — including Lee’s father — have been tried and even convicted of various crimes only to be pardoned or have their sentences commuted.

Lee, the vice-chairman of Samsung Electronics, has been the top leader of the Samsung group of companies since its chairman and his father, Lee Kun-hee, slipped into a coma three years ago. While Samsung is famous around the world for its smartphones and televisions, the Lee family also controls companies that make ships and pharmaceuticals, issue credit cards and manage hotels, among many other businesses.

Like other rich South Korean families, the Lees maintain control over the Samsung empire through a complex web of cross-shareholdings between their companies rather than through controlling stakes. Controlling stakes could expose heirs like Lee to steep inheritance taxes.

Prosecutors say Lee and top Samsung executives paid $38 million in bribes to maintain that control without paying taxes. Lee arranged the bribes during three meetings with South Korea’s former president, Park Geun-hye, beginning in late 2014, and they were paid to her confidant, prosecutors say. Prosecutors say the bribes were designed to win government support for a business deal that merged two Samsung-controlled companies despite opposition from other shareholders. Through a series of complicated shareholdings, that deal increased Lee’s control of Samsung Electronics.

Lee and his attorneys say the payments were signed off on without his knowledge. In terms of bribes, he told the court, he mostly reads American and Japanese publications instead of South Korean news outlets, leaving him ignorant of which officials he would need to influence to begin with. “I do receive a summary of daily news, but my work is mostly electronics and IT,” he said during the trial, referring to information technology.

The trial has offered South Koreans their closest glimpse yet of Lee. Despite arguably being the country’s most powerful business leader, Lee was not as well known as his father, who was known to make the occasional dramatic gesture and was twice convicted of bribery and tax evasion without going to prison.

 In rare public appearances, Lee has seemed low-key and awkward, such as the time two years ago when he publicly apologised for an outbreak of Middle East respiratory syndrome at a Samsung-owned hospital.

Regardless of the trial’s outcome, Lee’s reputation as a corporate leader has been damaged, say some Samsung watchers. 

“In the trial you come away with the impression that he is incompetent or at least he didn’t know his own company,” said Geoffrey Cain, the author of a coming book about Samsung.

“Either way his image is taking a hit, and people are starting to see he’s not that good under pressure. He doesn’t speak that fluidly, he tends to pace around and look at the floor or look nervous. He doesn’t come off as a profound and visionary leader like his father was.”

Those who have worked with Lee describe a man well-mannered and relatively soft-spoken. He is an avid golfer despite receiving dispensation from military service for back problems related to an equestrian accident.

Mr. Lee rarely visited factories and did not call the shots day-to-day, according to one former top Samsung official who declined to be named out of concern that he might damage his career by speaking about Mr. Lee.

Inside and outside the company, Mr. Lee is often compared with his father, who despite his legal troubles was well regarded for improving quality at Samsung Electronics and for making it a major global brand.

Perhaps mindful of the comparisons, Samsung has touted Mr. Lee’s own accomplishments, including solidifying relationships with American technology companies like Google and Apple. But until he became Samsung’s de facto leader he was not known for running a business by himself.

His first high-profile venture was created in 2000, during the dot-com boom, when he had an incubator set up to fund and support a series of start-up investments through Samsung. Called eSamsung, the venture struggled as the dot-com bubble burst, and the shares were eventually bought up by Samsung.

“The only time he took responsibility for profit and losses was eSamsung,” said Chang Sea-jin, a professor at the National University of Singapore, “and it was a complete disaster.”

At the trial, Mr. Lee has said he tried to live up to the reputation of his father and his grandfather, Samsung’s founder.

“I’ve been anxious, and I’ve struggled under heavy pressure to follow their footsteps and not lead Samsung down a wrong path,” he told the court earlier this month.

“But I missed the biggest part: The expectations of people and society on Samsung have grown stricter and bigger. I’ve learned a lot from the investigations and the trial. It’s all my fault.”

©2017 The New York Times News Service