Samsung Heir Gets Out of Jail Amidst Pressure From US for Chip Fab

Samsung Vice Chairman Lee Jae-Young, who has been acting as the de facto head of the Samsung conglomerate since his father suffered a heart attack in 2014, is set to be released from prison on parole this Friday after serving 6 months of a 30 month sentence. This follows international pressure from US companies, as Samsung is currently eyeing potential American semiconductor fabs. 

First, some context. Lee’s upcoming parole is actually his second time leaving prison early, as he was first sent to prison in 2017 and served about one year of a five year sentence before a retrial was ordered in 2019. After the retrial, the heir returned to prison this January. Jae-Young’s father, Lee Kun-Hee, passed away while Jae-Young was out of prison, leaving Jae-Young as his sole son and the likely soon-to-be official inheritor of the Samsung empire.

Jae-Young was first sent to prison for attempting to bribe now ousted former South Korean President Park Guen-hye, as well as a friend of hers, with payments and horses during a succession scandal following his father’s 2014 heart attack. The idea here was to have the former President back a merger between two Samsung group affiliates that would give Jae-Young a more official stake in the larger Samsung Electronics company. This was because while Jae-Young was leading Samsung in practice, he could not claim his father’s stake in the larger company until Kun-Hee passed. This left the heir with less than 1% actual ownership in the company prior to the merger.

This maneuvering all stems from South Korea’s chaebol system of business, wherein a family will split business holdings into various subgroups amongst itself, so that each member can hold a piece of the power.

Where this matters to the American semiconductor industry is in investments Samsung plans to make in US semiconductor production. The Biden administration recently announced its own 50 billion dollar plan  in light of the ongoing semiconductor shortage. Samsung is one of the largest chipmakers in the world, and is currently investigating building semiconductor fabs in Austin (where it already has one fab), Phoenix and New York, which would only strengthen President Biden’s efforts. 

Presumably seeking to maintain Samsung’s interest in continuing its American investments, the American Chamber of Commerce sent a letter to current South Korean President Moon Jae-In earlier this May expressing that “We believe a pardon of the most important executive of Samsung is in the best interest of both the US and Korea.” The letter’s receipt coincided with a Washington-based summit between Moon and President Biden that took place later that week.

While the timing is conspicuous, we cannot say for certain how much of a role foreign influence played in Lee’s early departure from prison. South Korea has a history of pardoning convicted business owners, as evidenced by the SK Group head Chey Tae-Won’s release from prison in 2015 after he was convicted for embezzling company funds.

Lee’s parole does break a pattern from the Korean Ministry of Justice of largely making inmates serve at least 70% of their sentences before becoming eligible for parole, though. According to the New York Times, the Justice Ministry said shortly ahead of Lee’s release that it would “make it easier for prisoners with good behavior to apply for parole,” although time will tell if that approach will apply to prisoners other than Lee.

But according to Bloomberg, Justice Minister Park Beom-kye announced that authorities granted Lee parole not only due to his good “attitude during incarceration,” but also due to public sentiment and the impact of Covid-19 on both the national and global economy. 

According to the Associated Press, polls show that the South Korean public, South Korean business leaders and President Moon’s own government are largely in favor of Lee’s release, perhaps due to the strength Samsung could bring to recovering electronics industries. 

However, the New York Times reports that activists still gathered outside the Justice Ministry as Lee’s parole was being deliberated, holding signs discouraging leniency toward corrupt business tycoons.

This also is not the Lee family’s first dance with the justice system, as Jae-Young’s father was himself twice convicted for corruption and tax evasion. He was pardoned both times.