Ahead of the decision of Samsung Electronics Vice Chairman Lee Jae-yong’s decision to revoke the bribery case, the judiciary demanded a vocation from Samsung, pointing out eight crimes under the head of the Samsung Group over the past 30 years. The purpose of each case is to check whether the compliance monitoring system has been properly applied. If effectiveness is not confirmed, the Samsung Group’s compliance monitoring system may not be reflected as a sentencing factor.
The Seoul High Court Criminal Division 1 (Deputy Judge Jung Joon-young) made this announcement at the 9th trial held on the 21st. “It was the data to be submitted to the professional hearing committee of the Compliance Committee, but we have compiled a questionable matter (because it was not submitted).” He said the purpose of confirming whether the back has been achieved.
Eight cases have been designated. All of them are personal crimes, such as the breach of private interests of the head family. First, it is related to the bribery case between Chun Doo-hwan and former President Roh Tae-woo, who stood together in court in 1996. They received 2205 billion won and 2628 billion won respectively from large companies as slush funds, and bribery was recognized. Among them, the late Samsung Group chairman Lee Byung-cheol gave a bribe of 22 billion won to Chun eight times from 1983 to 1987. The late Chairman Lee Kun-hee gave a total of 10 billion won to former President Roh four times from 1990 to 1992.
There was also a case of’Samsung SDS New Shareholder Bond (BW)’ in 1999, when the head family illegally increased their wealth. Vice-Chairman Lee and his younger brothers bought the BW of Samsung SDS, which was a privately held company at the time, for 7150 won, and the special prosecutor who investigated the case in 2008 saw the market price at 55,000 won per share. The special prosecutor’s office calculated the loss of Samsung SDS at 153.9 billion won. The court for revocation of this case determined that the final loss in 2009 was 22.7 billion won, and sentenced former Chairman Lee Kun-hee to three years in prison and five years probation.
Two illegal political funding cases in the 2000s were also included. One is related to the case of Cho Sejeong-deal, the second son of former President Kim Dae-jung, Kim Hong-up, in 2002. In the course of the investigation, it was revealed that In-ju Kim, the president of the Samsung Group’s restructuring headquarters, gave Mr. Kim 500 million won in the name of’activity expenses’. During 2008-2011, Samsung bribed former President Lee Myung-bak with a bribe of 6.1 billion won in the name of dozens of US litigation expenses. A false consulting contract was also signed to hide the payment. Former President Lee was handed over to trial in 2018 on charges of bribery and other charges, and was finally sentenced to 17 years in prison in October.
The rest are three cases recently prosecuted. Lee Jeon-bae, CEO of Samsung Venture Investment, who was called the “property manager,” was convicted in 2018 because he created an account under the name of Chairman Lee Kun-hee and owned the stocks of the affiliates in the name of Samsung executives. In addition, three executives and employees of Samsung C&T, including Executive Vice President Choi Young-woo, were charged with embezzlement in 2018 by paying 3.3 billion won for housing construction in Hannam-dong owned by Chairman Lee Kun-hee as Samsung C&T funds. They were sentenced to two years in prison and three years probation at the first trial in February, and their sentences were confirmed in August.
In the case of the destruction of evidence related to the fraudulent accounting of Samsung Biologics, a number of executives of the’Business Support TF’, which were newly established after the dismantling of the Future Strategy Office, and Lee Wang-ik, vice president of the Samsung Electronics Finance Team, involved. Employees of affiliates such as Samsung Biologics search for the words’JY’,’merger’, and’unwarned room’ on their laptops and instruct them to delete them, or hide the company’s public server on the floor of the factory and in the house of employees. The charges were admitted at the first trial in December last year, and the second trial is in progress.
For each case, the court asked Samsung to “evaluate the legal risk, analyze the cause of the occurrence, and clarify how the measures to prevent it were made.” All are the basics of the compliance monitoring system. In particular, risk classification (legal risk assessment) is the basis to be preceded in that’unidentified risks cannot be managed’. It was also stipulated in the’Standard Compliance Control Standards for Listed Companies’ created by the Ministry of Justice in 2018 with the Korea Listed Companies Council.
The view of the judges is also visible in that they all are related to private crimes. The focus was on whether the Samsung Compliance Committee was effectively controlling the illegal activities of the top management. The Justice Department said, “An effective monitoring system that scares the total number of companies should be operated,” while reflecting the Compliance Committee in the sentencing factor.
However, Samsung once replied that there was no related data already. In the matters such as the succession of management rights, the Samsung C&T-Cheil Industries merger in 2015, and the disposition of Samsung Life’s stake in Samsung Electronics in accordance with the revision of the Insurance Business Act, the three expert judges who heard the Compliance Committee reviewed in November. We asked Samsung if we had a reporting system in place. Upon receiving the answer that “there is no related data,” they evaluated that the surveillance system was insufficient.
Therefore, attention is paid to Samsung’s answer. If you clarify enough to the court’s request, you will be asked to submit undisclosed data to the professional judges, creating contradictions. Conversely, if not sufficiently explained, it may negatively affect the evaluation of the compliance committee by the court.
The lawyers decided to submit their position in writing to the court by the morning of the 24th. The judge said it could designate an additional trial date based on the response. The decision trial is scheduled for 2 pm on the 30th.
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