But regardless of the legal outcome, analysts say the allegations against Lee Jae-yong are unlikely to deeply harm his brand\u2019s main global business: selling useful devices to consumers.
\u201cBecause they are very tilted to the consumer business, I don\u2019t think this is going to have any impact at all,\u201d said Patrick Moorhead, president and principal analyst Moor Insights and\u00a0Strategy, a technology industry analyst firm. \u201cSamsung\u2019s senior leadership is not directly related to the global brand.\u201d
Samsung, by far South Korea\u2019s largest company, may be best known as the world\u2019s top smartphone manufacturer, but it also is involved in life insurance, shipbuilding, medicine and more.
Lee, who holds the title of vice chairman but is considered the top executive and heir apparent at Samsung, has become ensnared in a legal drama over\u00a0the actions of South Korea\u2019s impeached president.
While the company’s sales may continue unabated, a court in Seoul is expected to decide on Thursday whether Lee, the grandson of Samsung\u2019s late founder, should be arrested on charges that he improperly directed about $36 million to firms associated with a confidant of embattled President Park Geun-hye.
Prosecutors leading the sprawling investigation into a power abuse scandal that has upended South Korea’s political scene have accused Lee of facilitating a bribe to the president\u2019s longtime friend, Choi Soon-sil, who has been jailed in the case amid allegations that she used her influence with Park to meddle in state affairs and extort funds from companies for personal gain.
In Samsung\u2019s case, prosecutors allege that the funds were an effort to obtain approval for a controversial merger between two Samsung Group affiliates, an effort seen by some as a move to solidify Lee\u2019s dynastic control of the company.
They sought his arrest on Monday after recently summoning Lee, 48, for a marathon questioning session \u2014 a process that forced the publicly reserved corporate executive to face a mass of reporters. \u201cI am deeply sorry, and I apologize to the Korean people for failing to put our best face forward due to this incident,\u201d he said.
Samsung officials reject the idea that the company contributed funds to receive favors, taking issue, in particular, with the suggestion that Lee\u2019s succession or a merger were involved. \u201cWe believe the court will make the appropriate judgment on this matter,\u201d said Rhee So-eui, a company representative.
Lee\u2019s lawyer, Song Woo-chul, appeared confident about his client\u2019s fate after the hearing. \u201cWe are certain the court will make a wise decision,\u201d he said.
Bringing the charges was\u00a0no small step for the prosecution\u00a0because of Samsung\u2019s dominance in South Korea. Prosecutors have also signaled they will target Park if her impeachment is upheld by a constitutional court. The president has denied acting illegally but has so far declined to cooperate personally with investigations \u2014 both legal and political \u2014 into her conduct. Several other people in her orbit have been arrested in the investigation.
In an economy that is still heavily driven by exports, Samsung\u2019s products account for about 20%\u00a0of South Korean exports and a significant share of its gross domestic product.
While the case has saturated the news in South Korea, the company\u2019s electronics business \u2014 the main driver of its global presence \u2014 marches forward. Tens of millions of its ubiquitous smartphones, for example, still ship each quarter.
The company, of course, faces other challenges that industry analysts say are more daunting. Last year, Samsung faced the specter of recalling its Galaxy Note 7 smartphone \u2014 thought of initially as a solid iPhone competitor \u2014 after some caught fire. It\u2019s also faced controversy about washing machines that had\u00a0mechanical problems.
\u201cThere is a gap between what every Korean knows, and what everyone outside of Korea knows,\u201d said Avi Greengart, who directs consumer device research at Current Analysis, an industry firm. \u201cI would argue that the scandals around product matter far more to Western consumers than political corruption and corporate structure.\u201d\u00a0
Some local experts remain confident of the company\u2019s short-term prospects, despite the recent hiccups.
Park Sangin, an economics professor at Seoul National University, said he doesn\u2019t believe Lee\u2019s criminal charges \u2014 even if they lead to an arrest \u2014 will have a deep impact on the company\u2019s electronics business, which has its own executives to manage day-to-day product decisions.
A broader concern, he said, is whether the legal troubles could disrupt the succession of Lee, who has served as the larger Samsung group\u2019s de facto leader since his father suffered an incapacitating heart attack in 2014.
The leaders of such conglomerates\u00a0\u2014 who, with government acquiescence, have propelled the country\u2019s economy from the ashes of the Korean War to an Asian powerhouse \u2014\u00a0have long been given a measure of immunity from legal accountability. Many have been charged with misdeeds only to receive presidential pardons or light sentences in the name of economic progress.
Some observers wonder whether that economy-first sentiment is as resonant today with South Koreans, many of whom are struggling with income inequality, high household debt \u2014 and, of course, a frustration with the political system. In this case, prosecutors admit weighing the economic impact of their charges.
Still, the prosecution\u2019 spokesman, Lee Kyu-chul, said,\u00a0\u201cServing justice is far more important than the impact the arrest could have on the national economy.\u201d
Mark Clifford, executive director of the Asia Business Council, remembers South Korea\u2019s ascent in the late 1980s, when the country hosted the Olympics but still had a relatively low standard of living compared to today. He believes the country is less likely to endure unethical corporate behavior \u2014\u00a0or commingling with government.
A broader change in policy related to South Korea business titans could, in theory, lead to conglomerates such as Samsung being forced to change their corporate structures, something reform-minded analysts have sought for years, to no avail.
\u201cThat means the structure of the entire group is pending,\u201d Park, the economics professor, said. \u201cSo there\u2019s a lot of uncertainty.\u201d
Right now, though, one fact outcome certain, he said: \u201cEverything is Samsung in Korea.\u201d
L. A.’s 2024 Olympics bid ; the wife of the Orlando nightclub gunman \u00a0was arrested in Oakland; American Apparel begins massive layoffs ; Trump’s plan to repeal Affordable Care Act \u00a0would likely cost California billions in federal funds.
Pastor James McAfee Jr. of the Eagle’s Nest church\u00a0talks about the Kingdom Day Parade and the current political climate.
Pam Gross, 54,\u00a0has relied on Medi-Cal for decades to afford treatment for lupus and fibromyalgia. She\u2019s worried any changes to Medi-Cal will disrupt her healthcare regimen, which includes several doctors\u2019 appointments each week and treatment from 10 specialists. (Al Seib \/ Los Angeles Times)
Video by Genaro Molina \/ Los Angeles Times
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What values does Hollywood promote? A storm that hit Northern California toppled the Pioneer Cabin Tree. Who should discipline police officers? Michelle King has made no big waves in her first year running Los Angeles Unified. A state watchdog agency is investigating political donations connected to real estate developer Samuel Leung. The Chargers are moving \u00a0to L. A. Obama’s legacy: \u00a0part 1. California\u2019s drought conditions \u00a0have improved in the northern part of the state.<\/p>\n