Jay Y. Lee, vice chairman of Samsung Electronics Co. and de-facto head of Samsung Group, on Tuesday revisited the prosecution for questioning over illegalities in the 2015 merger of two key affiliates and hereditary succession, the last of the trial that started with the bribery case three years ago involving former president impeached for multiple corruptions.

Lee discreetly paid a visit to Seoul Central District Prosecutor’s Office on defendant status to answer questions on the merger between Samsung C&T Corp. and Cheil Industries in 2015. The merger was seen as instrumental in tightening Lee’s control over the group on behalf of his bedridden father.

Shares of Samsung Electronics closed Tuesday 0.82 percent higher at 49,250 won.

Lee is accused of ordering illegalities to achieve the merger. He also can be accountable for the accounting fraud of Samsung Biologics, then a subsidiary of Cheil Industries, in the process of merger.

Prosecutors suspect that accounting changes were made at Biologics following the merger between Samsung C&T and Cheil Industries to back smoother transition of power from ailing chairman Lee Kun-hee to his son.

Each board of two affiliates approved the merger in May, 2015, which involves an offering of 0.35 Cheil Industries share for each Samsung C&T share. Lee owned 23.2 percent of Cheil Industries shares but none of Samsung C&T.

The merger ratio was seen as favorable to Cheil Industries, allowing Lee to stably secure shares of Samsung C&T, holding company of Samsung Group, to tighten his control over the conglomerate.

Samsung Group is suspected of having devaluated Samsung C&T stock price and overstated Cheil Industries value to meet merger ratio of 1:0.35 favorable to the fashion affiliate.

Samsung C&T supplied only 300 new housing in the first half of 2014, but after the merger bill passed at the shareholders meeting, the company announced its plan to provide 10,994 houses in Seoul. It also announced a basic construction deal for a combined cycle power plant worth 2 trillion won ($1.6 billion) in Qatar only in the end of July, 2015, after merger was approved.

The appraised value of standard land of Everland owned by Cheil Industries jumped as high as 370 percent in 2015 from the previous year. The transport ministry conducted an independent inspection and tossed the case to prosecutors after judging possibility of external pressure.

Prosecutors also suspect the alleged accounting fraud involving Samsung Biologics, then subsidiary of Cheil Industries, is also related to management succession at the group. Samsung Biologics allegedly did not reflect Samsung Bioepis call option contract with U.S. Biogen to its accounting.

After the 2015 merger, however, the biotechnology company calculated call option as 1.8 trillion won debt and made changes to its accounting rule to bring 4.5 trillion won worth of profit to its books.

Prosecutors suspect that Samsung Biologics reflecting call option caused a valuation loss and erosion. It also illegally changed accounting standard as it was concerned of issues such as appropriate merger ratio.

Once Lee answers to the allegation related to power succession, he would finally see the end of lengthy trial.

Lee’s return to the judiciary comes three years and three months after the vice chairman was arrested in February, 2017, over his alleged role in a bribery case related to former ousted President Park Geun-hye.

By Pulse

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