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Billionaire Samsung heir arrested in $40m corruption probe





  • Lee Jae-Yong oversees the electronics giant in the absence of his ailing father
  • The South Korean billionaire has been detained on bribery and other charges
  • He normally lives in a $4m mansion in Seoul but is now waiting in a prison cell 

By Julian Robinson for MailOnline and Afp

Published: 02:43 EST, 17 February 2017 | Updated: 05:47 EST, 17 February 2017

The billionaire South Korean heir to the Samsung empire has been arrested over $40million bribery claims - and is being held in prison, it has emerged.

Lee Jae-Yong, who normally lives in a $4million mansion in the capital Seoul, is being held in a cell with a mattress on the floor after being detained on bribery and other charges.

Among other allegations, Lee is accused of paying nearly $40 million in bribes to a confidante of President Park Geun-Hye to secure policy favours. He has denied any wrongdoing.

Lee Jae-Yong (centre) who normally lives in a $4million mansion in the capital Seoul, is being held in a small prison cell with a mattress on the floor after being detained on bribery and other charges Lee Jae-Yong (centre) who normally lives in a $4million mansion in the capital Seoul, is being held in a small prison cell with a mattress on the floor after being detained on bribery and other charges

Lee Jae-Yong (centre) who normally lives in a $4million mansion in the capital Seoul, is being held in a small prison cell with a mattress on the floor after being detained on bribery and other charges

The probe is related to a corruption scandal that triggered the impeachment of the President. 

A district court cited new evidence in approving the arrest warrant against vice-chairman Lee Jae-Yong, who oversees the family-run electronics giant in the absence of his ailing father. It is the latest blow to the firm's public image. 

'It is acknowledged that it is necessary to arrest (Lee Jae-Yong) in light of a newly added criminal charge and new evidence,' a court spokesman said in a statement.

Lee, the third-generation leader of South Korea's massive Samsung Group and scion of the country's wealthiest family, is being held in 71 square foot detention cell with a toilet in the corner behind a partition. 

The 48-year-old has no shower, only a wash-stand. Bed is a mattress on the floor.

Lee is being held in a single cell and will not be allowed contact with other inmates, said an official at the Seoul Detention Centre, a facility on the outskirts of the city where arrested politicians and corporate chieftains are usually held, along with other detainees.

The billionaire South Korean heir to the Samsung empire has been arrested over $40million bribery claims, it has emerged  The billionaire South Korean heir to the Samsung empire has been arrested over $40million bribery claims, it has emerged 

The billionaire South Korean heir to the Samsung empire has been arrested over $40million bribery claims, it has emerged 

'This is a highly public case, and as you know many involved in the case were already here,' the official told Reuters.

Prison officials don't want Lee discussing the case with others involved in the case, the official said, explaining why the Samsung scion was being held in a single cell. Also, there may be safety issues.

'There are concerns about destroying evidence,' the official said, adding that Lee was not being given special treatment.

Lee's lawyers declined to comment.

Lee, who is divorced with two children, has a net worth of $6.2 billion and ordinarily lives in a $4 million Seoul mansion. The Samsung Group he heads is the world's biggest manufacturer of smartphones, flat-screen televisions and memory chips, and Lee is accustomed to rubbing elbows with Silicon Valley titans such as Facebook's Mark Zuckerberg and Apple's Tim Cook.

An accomplished equestrian, Lee is also a lifetime member of the Royal and Ancient Golf Club of St. Andrews in Scotland.

At the detention centre, Lee will be allowed visitors but they can speak only through a glass partition, for up to 30 minutes at a time. However, inmates are allowed unlimited meeting time with their lawyers.

He can exercise, but on his own, for 30 minutes a day. 

Among other allegations, Lee is accused of paying nearly $40 million in bribes to a confidante of President Park Geun-Hye (pictured) to secure policy favours. He has denied any wrongdoing Among other allegations, Lee is accused of paying nearly $40 million in bribes to a confidante of President Park Geun-Hye (pictured) to secure policy favours. He has denied any wrongdoing

Among other allegations, Lee is accused of paying nearly $40 million in bribes to a confidante of President Park Geun-Hye (pictured) to secure policy favours. He has denied any wrongdoing

Before he entered his cell, prison officials subjected Lee to an identification check and physical examination, according to the detention centre official, who declined to be identified given the sensitivity of the matter. He showered and was issued an inmate uniform and boxes with toiletries and bedding.

Prosecutors have up to 10 days to indict Lee, although they can seek an extension. After indictment, a court would be required to make a ruling within three months.

Lee will be given simple 1,443 won ($1.26) meals, usually rice with side-dishes. Anything additional must be bought at the centre's commissary.

Meals will be served on plastic trays slid through a small square window in the cell door. Lee is required to wash his own tray. Inside the cell, he can watch TV between 8 a.m. and 6 p.m., but only a single channel with recorded programmes broadcast by the justice ministry.

Fellow inmates include Choi Soon-sil, a friend of President Park Geun-hye who is at the centre of the scandal and who Lee is accused of bribing, as well as the country's former culture minister and former presidential chief of staff.

The cell has a small study table to one side.

'Inmates can receive eyeglasses and books from outside but should buy other things at the commissary inside, such as snacks, coffee, instant noodles, detergent, razors, and towels,' said a man surnamed Sohn who runs a private errand service for detainees at the centre and requested that his full name not be used due to the sensitivity of the matter. 

Samsung offered a measured response following the arrest as shares of many Samsung units took a hit on the Seoul stock market.

Samsung is already reeling from the debacle over the recall of its flagship Galaxy Note 7 device Samsung is already reeling from the debacle over the recall of its flagship Galaxy Note 7 device

Samsung is already reeling from the debacle over the recall of its flagship Galaxy Note 7 device

The group's flagship Samsung Electronics slid 0.4 percent while its de-facto holdings firm, Samsung C&T, dropped by two percent and another key unit, Samsung Life Insurance, fell 1.4 percent.

'We will do our best to ensure that the truth is revealed in future court proceedings,' the group said in a statement. 

Lee, the son of Samsung group boss Lee Kun-Hee, has been quizzed several times over his alleged role in the scandal that has rocked the nation.

The 48-year-old, described as a key suspect in the scandal, narrowly avoided being formally arrested last month, after the court ruled there was insufficient evidence.

But prosecutors on Tuesday made a second bid, saying they had collected more evidence in recent weeks.

His arrest, the first for a Samsung chief, will send shock waves through the group, which is a major part of the South Korean economy and includes the world's largest smartphone maker, Samsung Electronics.

'This is a blow to Samsung's image as a global player in the short term', HMC Investment Securities' analyst Greg Roh told AFP.

IBK Investment Securities' Lee Seung-Woo said that given the cloud over Lee, at a time when the firm is attempting a complicated restructuring, Samsung could refrain from pursuing long-term investments such as overseas mergers and acquisitions.

The company is already reeling from the debacle over the recall of its flagship Galaxy Note 7 device and reports have suggested it could face sanctions from overseas authorities if Lee is punished.

Samsung offered a measured response following the arrest as shares of many Samsung units took a hit on the Seoul stock market  Samsung offered a measured response following the arrest as shares of many Samsung units took a hit on the Seoul stock market 

Samsung offered a measured response following the arrest as shares of many Samsung units took a hit on the Seoul stock market 

Lee's father and grandfather repeatedly had close brushes with the law but were never jailed. 

The scandal centres on Choi Soon-Sil, who is accused of using her close ties with Park to force local firms to 'donate' nearly $70 million to non-profit foundations which Choi allegedly used for personal gain.

Samsung was the single biggest donor to the foundations. It is also accused of separately giving millions of euros to Choi to bankroll her daughter's equestrian training in Germany.

The court turned down prosecutors' demand for a separate arrest warrant for another Samsung executive, who is also the head of the Korea Equestrian Federation, citing his limited role in the scandal.

Lee has effectively taken the helm of Samsung - South Korea's biggest business group - since his father suffered a heart attack in 2014.

Prosecutors are probing whether Samsung had paid Choi to secure state approval for the controversial merger of two Samsung units seen as a key step towards ensuring a smooth power transfer to Lee.

The merger in 2015 of Samsung C&T and Cheil Industries was opposed by many investors who said it wilfully undervalued the former unit's shares.

But the deal went through after Seoul's state pension fund -- a major Samsung shareholder -- approved it.

Samsung is South Korea's largest business group and its revenue is equivalent to about a fifth of the country's GDP.

Lee's arrest was seen as a blow to Park who is staging an uphill battle at the Constitutional Court to overturn her impeachment by parliament.

The Constitutional Court on Thursday said it would wrap up hearings on the impeachment case Friday next week, sparking expectations that it will reach a verdict around March 10.


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Larry Whyte
Larry Whyte

He is a leading authority on business trends including ‘big data’, self-employment and the social media revolution. He’s the author of the award-winning book, Marketing Shortcuts for the Self-Employed (2011, Wiley) and a regular speaker for Bloomberg TV. He has spoken about global mega trends, big data and the social media revolution at conferences and business events around the world .

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