Five years? Korea debates Samsung verdict as both sides appeal

[SEOUL] The sheer size of Samsung in South Korea has long divided public opinion in the country and that continues as the heir apparent appeals his five-year prison sentence for bribery.

Jay Y Lee, the founder's grandson, will this month begin legal arguments against his conviction as he continues to profess innocence. Prosecutors will line up on the other side as they push to lock him up for a term closer to the 12 years they sought at trial, cheered on by politicians and critics of South Korea's biggest chaebol.

Rhetoric around the case has escalated since the verdict was handed down, the latest stage in a scandal that brought down a president, created turmoil on the streets and tainted the reputation of the technology titan. It unleashed resentment at the chaebol that dominate the corporate landscape, brought out supporters thankful for their role in the economy and led to the finger of blame being pointed in many directions.

"The sentence is too weak," said Park Ju Min, a lawyer and lawmaker with President Moon Jae In's ruling Democratic Party of Korea. "The times have changed and given rise to more people who want to see corruption between businessmen and politicians end once and for all. Lee's sentence can be a stepping stone."

Lee was convicted of all five charges he faced, with the court ruling the 49-year-old "tacitly" offered bribes to then President Park Geun Hye in the hope that she'd help him succeed at Samsung. That included using company money for an US$800,000 horse used by the daughter of her confidante Choi Soon Sil.

Lawyers for Lee argued the contributions were in response to requests from President Park to support the nation's equestrians and not to get government backing for a contentious merger that boosted his influence over flagship Samsung Electronics Co.

Some observers have pointed to the huge publicity surrounding the trial, with extensive media coverage and discussion.

"It's true there's been political and social pressure on the trial," Khang Hyo-shang, a spokesman for the major opposition Liberty Korea Party, said in a text message. "This must not repeat in the appeal. Substantive truths must be further revealed at appeal to ensure the trial does not become unfair."

While Lee's sentence was substantial by the standards of chaebol prosecutions - at five years it's too long to be suspended - that hasn't alleviated anger at the billionaire.

Both sides have appealed the verdict and sentence to Seoul High Court, the second of the three tiers in South Korea's judicial system, but they have yet to lay out their detailed arguments.

"The odds are against Lee at the moment, but it's still open to the high court's judgment whether circumstantial evidence is enough to prove tacit bribery." said Paek Sung Moon, a Seoul-based lawyer who has followed the case. "So far prosecutors have won half a victory."

Still, the sentence surprised many South Koreans used to seeing tycoons get away with suspended prison terms for everything from bribery to assault. That list includes Jay Y's father, Samsung Chairman Lee Kun Hee, who managed to avoid jail time even after convictions for embezzlement and tax evasion. He eventually received a presidential pardon.

After scandal forced out Park, Mr Moon was elected president on a platform that promised to rein in the chaebol. That makes it less likely he will follow in the footsteps of his predecessors with a pardon.

The head of his own party, Choo Mi Ae, initially welcomed the "iron hammer" of a five year sentence before later describing it as a "cotton cudgel." Legislator Park Ju Min argued that by sentencing Lee to just five years, the stage is set for a reduction on appeal to three, which could then be suspended.

While Samsung Electronics is on a roll at the moment, with record earnings and a recent all-time high for its shares, major newspapers expressed concern about the impact on a local company facing renewed competition from China and Apple Inc.

Chosun Ilbo, the top selling newspaper in the country, said in an editorial that it feared for the future of Samsung as rivals catch up fast in smartphones, displays and semiconductors, three areas the South Korean company dominates. It also defended Lee, pointing out the difficulty any executive would face if pressured for a bribe by the nation's leader.

"A company receives retaliation if it refuses a president's demand, and gets punished if it accepts," the paper said. "The super first class has been trapped by the third and fourth class that is 'South Korea's politics."'

Controlled by the Lee family through a web of cross-holdings, Samsung comprises about 60 units selling life insurance, cargo ships and clothes as well as the better known smartphones and TVs. Its revenue equals about one fifth of the country's gross domestic product, an argument that in the past might have helped swing public opinion behind Lee.

But that's not the case now.

"Political elites have had some success in persuading a significant portion of the populace that such leniency was indeed in Korea's 'national interest."' said Kevin Hockmuth, who teaches Korean studies at Japan's Akita International University. "Outrage emanating from the Choi Soon Sil affair has fostered a broad societal consensus that this sort of calculus is no longer acceptable. I would imagine there will be a huge outpouring of civil disquiet if he does indeed escape a prison term."

BLOOMBERG