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Release of Samsung head won't hurt chaebol reform, analysts say

Lee Jae-yong's comeback seen to have little impact on conglomerate management

Lee Jae-yong, vice chairman of Samsung Electronics, speaks before leaving a detention center in Uiwang, South Korea, on Feb. 5.   © AP

SEOUL -- A Seoul court set free Samsung Group leader Lee Jae-yong on Monday, cutting by half and suspending the five-year jail term he was dealt on conviction of bribery and embezzlement, but analysts say the move will not derail South Korea's plans to reform chaebol.

Lee was convicted August last year by a Seoul district court for offering favors to former President Park Geun-hye and her close confidant, Choi Soon-sil, in return for paving the way for his ascension to leadership of South Korea's biggest conglomerate through the merger of Samsung C&T and Cheil Industries.

"The essence of this case is that South Korea's most powerful figure Park Geun-hye threatened executives of Samsung Group," Chief Judge Jeong Hyeong-sik of the High Court in Seoul said in the Monday ruling. "Choi pursued her own interests with twisted ideas of motherhood and the accused could not decline them."

Lee was arrested in February 2017 and has served a year of the sentence. He is now expected to return to manage the group. Samsung Electronics, the group's crown jewel, posted record high earnings last year thanks to an upbeat semiconductor market, despite the absence of Lee who is vice chairman.

Some analysts say that his release will have little impact on President Moon Jae-in's plans to unravel complicated structures in family-controlled conglomerates that give them the upper hand over smaller shareholders. Moon swept into power after the impeachment of Park over this case on promises of cutting cozy ties between government and big business, and enforcing rules around corporate governance and transparency. Choi was dealt a three-year jail term in June last year.

Park Ju-keun, president at CEO Score, a corporate information provider, said that Lee's release did not mean that the government's drive to reform chaebol had stalled. "Even though Lee is released, he already had served for one year. This is a strong signal to chaebol that the government will not accept conglomerates' wrongdoings."

Others say that Lee's comeback won't have an immediate impact on the company. Fitch Ratings analyst Shelly Jang said: "Samsung already has a professional management team. The company is also riding on a positive wave in the semiconductor industry."

Shares in Samsung Electronics edged up 0.46% to 2,396,000 won on Monday, after tumbling to a five-month low of 2,300,000 won in the morning session. The benchmark Kospi lost 1.33% to 2,491.75, trailing sharp falls in Wall Street last Friday.

Samsung Electronics declined to comment on the ruling and when Lee would return to post. Lee said to the media after he was freed from the prison in Uiwang: "It was really precious time for me to examine myself. I will be careful in checking myself."

It is understood his first port of call was Samsung Medical Center in southern Seoul to visit his ailing father Kun-hee.

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