Court sentences Samsung heir to five years prison

South Korea's business and political communities were divided over a local court's ruling to put Jay Y. Lee, the heir-apparent of Samsung Group, behind bars. If Lee Kun-hee dies, it could trigger the type of infighting seen in other chaebol families in recent years, said Park Sang-in, a professor of public administration at Seoul National University and a chaebol critic.

Lee was also found guilty of hiding assets overseas and of perjury for falsely testifying at a parliamentary hearing on the scandal. Lee has been accused of offering bribes of 38 million United States dollars for various departments after the death of his father.

Lee's legal representatives said they will immediately appeal the case.

In 2015, USA hedge fund Elliot Management filed for an injunction against the merger of two Samsung units created to cement a power transfer to the heir apparent of Samsung Group from his ailing father Lee Kun-hee, who has been bedridden since May 2014 due to a heart attack.

Shares of Samsung Electronics closed down 2 percent, compared with a 0.35 percent drop for the benchmark Kospi index.KS11, while shares in the conglomerate's de facto holding company Samsung C&T 028260.KS dropped 3.4 percent and Samsung Life Insurance 032830.KS fell 2.9 percent due to foreign selling after Friday's sentencing, analysts said.

"We hope this will be the first step in cutting the stubborn ties of corruption between politics and business, which has been a roadblock to progress in our society", said Yoon Young-chan, senior secretary at the Blue House, the South Korean president's executive office and residence.

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The sentencing is the latest episode in a scandal that saw millions of South Koreans protest last autumn, leading Park to be ousted.

After the sentencing, Lee's attorneys said they can not accept the verdict, saying they were confident that the heir would be cleared of all charges at an appeals court. The company has successfully weathered past crises that include two recalls of Galaxy Note 7 smartphones prone to catch fire and Lee's arrest. Twice convicted of tax evasion and bribery, the elder Lee never spent any time in prison.

Samsung is by far the biggest of the chaebols, as the family-controlled conglomerates that dominate Asia's fourth-largest economy are known, with its revenues equivalent to around a fifth of the country's GDP.

Some reports state some of Samsung's major investment projects may be suspended under the leader's imprisonment. The court ruled that tapping into the publicly traded company's funds to raise the W8 billion constituted embezzlement, and W3.7 billion of that money was illegally transferred to Germany, where Chung was living. Some were pardoned and others got sentences reduced on appeal.

Samsung Group headquarters in southern Seoul. "The leadership vacuum may not have short-term effect, but in the long-term, it is a serious problem".


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