Samsung’s group leader Lee Jae-yong has been arrested in conjunction with the corruption scandal involving South Korea’s president Park Guen-hye.
After the news of the arrest was announced, shares in Samsung Electronics fell by as much as 1.6 percent on 17 February, according to The Financial Times.
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According to Bloomberg, it appears a South Korean special prosecutor may indict Lee Jae-yong this week, alongside four other executives at Samsung group. The deadline for the prosecutor’s investigation is set for Tuesday 28 February.
What has Lee Jae-yong done wrong?
The heir to the company was first questioned by prosecutors in January, but they chose not to arrest him. That changed today however when he was accused of bribery, embezzlement and perjury.
Prosecutors have accused Lee of giving donations worth $36m to organisations linked to president Park’s close friend Choi Soon-sil.
According to the charge, this was done to win government support for a big restructuring of Samsung that would help Lee become the official leader of the company, as he is currently standing in as chairman for his ill father, Lee Kun-hee.
In a parliamentary hearing in December, it was heard that Samsung gave a total of $17.7m to two foundations, but denied seeking favours in return for the money.
Samsung denies Lee directed bribes to Choi Soon-sil or Park.
What is Choi-gate?
South Korea’s president Park Guen-hye was impeached in December last year due to his relationship with Choi.
Choi is accused of using her connections to gain influence and financial benefits and is in custody, facing charges of coercion and abuse of power.
Park has been charged with allegations she ordered government members to support a merger of two affiliates of the Samsung group.
At the same time, Samsung is alleged to have bribed Park’s friend, Choi, which is how Lee fits into this.
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This scandal has been rolling on for a few months, but Park was officially impeached in December.
The country’s prime minister, Hwang Kyo-ahn, is now South Korea’s interim president.
What does this mean for Samsung?
After stock prices initially fell, they slightly recovered before closing on the Korean Stock Exchange earlier today.
The company has had a difficult time of late: its flagship Galaxy Note 7 smartphone had to be recalled shortly after its release in September 2016, after issues with the batteries were causing the phones to go up in flames.
The first recall of the devices alone was expected to have cost Samsung nearly $2bn as a result of the cost of replacing the phones and the falls in the company’s share price.
Despite this, the tech giant made an operating profit of $7.84bn in the fourth quarter of 2016.
Lee is currently being held in a single cell in Seoul Detention Centre. He has denied any wrongdoing.
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