Samsung Vice Chairman Arrested on Bribery Charges

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FILE PHOTO - Samsung Group chief, Jay Y. Lee, leaves after attending a court hearing to review a detention warrant request against him at the Seoul Central District Court in Seoul, South Korea, January 18, 2017. REUTERS/Kim Hong-Ji/File Photo

Samsung vice chairman and heir to electronics giant Jay Y. Lee has been arrested in Korea on charges of corruption.

Lee is accused of paying bribes to an advisor of President Park Geun-hye in exchange for political favors. The New York Times reported that he is alleged to have given a total of $36 million to Park’s secret advisor in order to win government support for a merger between two Samsung subsidiaries. Park, Korea’s first female leader, is in a big world of trouble herself after being impeached over the influence of her aides. Lee is essentially the highest ranking business executive to be caught up in the Samsung mess.

Lee, son of current company chairman Kun-Hee Lee, is seen as the company’s heir apparent and he has already assumed corporate control in the absence of his father due to illness. Back in January, prosecutors issued a warrant for his arrest in relation to the Park saga, although that time it was rejected by a court days later.

The legal woes of Samsung vice chairman Lee Jae-Yong will inflict more damage on the conglomerate’s reputation than its financial performance, according to two of the ‘Big Three’ ratings agencies.

Samsung Group chief, Jay Y. Lee, leaves after attending a court hearing to review a detention warrant request against him at the Seoul Central District Court in Seoul, South Korea, January 18, 2017.

Kim Hong-Ji | Reuters

Samsung Group chief, Jay Y. Lee, leaves after attending a court hearing to review a detention warrant request against him at the Seoul Central District Court in Seoul, South Korea, January 18, 2017.

Lee’s arrest poses another risk to Samsung’s image following last year’s recall and suspension of the Galaxy Note 7, Fitch Ratings and S&P Global warned in separate statements late on Monday.

His arrest is likely to delay strategic investment and weigh on investor sentiment in the short term, Fitch ratings agency commented. New corporate leadership could also cause some delays in key strategic decisions, such as mergers and acquisitions, S&P added, which may undermine the company’s competitive position in the longer run however Samsung’s business segments are run by their own management teams so Lee’s absence won’t impact daily operations, all three agencies flagged.

The Korean giant has liquid resources—$75.4 billion as of 2016—are more than sufficient to cover total debt and expected expenditure for 2017,while high levels of capital spending will also retain Samsung’s title as one of the world’s leading tech firms it was pointed out by Fitch ratings agency.