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Samsung chief Lee Jae-yong leaves prison on parole

Tycoon faces challenges in maintaining chip and smartphone leadership

Samsung Electronics' Vice Chairman Lee Jae-yong leaves the Seoul Detention Center on parole in Uiwang, South Korea on Aug. 13.   © Reuters

SEOUL -- Samsung Electronics' Vice Chairman Lee Jae-yong was paroled on Friday after serving more than half of a 30-month prison term for corruption, raising fresh questions about the principle of equality under the law in South Korea where convicted business titans often receive leniency.

The 53-year-old executive, who despite his title is the company's key figure, walked out of the Seoul Detention Center in Uiwang, a city just south of Seoul, in the morning.

"I am very sorry for making people worried," Lee, wearing a mask, told reporters before bowing. "I know there are concerns, criticism, worries and big expectations for me. I will do my best." He then got into a vehicle and departed.

Numerous people gathered outside the prison, some in support of his release and others opposing it in an illustration of passions on the issue.

Lee was put on a list of 810 prisoners to be released on the occasion of Liberation Day, which falls on Sunday and marks the end of Japanese colonial rule over the Korean Peninsula in 1945. The nine-member Parole Review Committee, chaired by Vice Justice Minister Kang Sung-kook, decided to release Lee in a meeting on Monday, hoping that his presence in the executive suite will provide a boost to South Korea's economy.

"In particular, Samsung Electronics Vice Chairman Lee Jae-yong was included on the list as we considered the national economy and global economic circumstances due to the COVID-19 pandemic," a Ministry of Justice statement said. "We also considered various factors, including public sentiment and his attitude in prison."

The presidential Blue House asked people to understand Lee's release as a choice made in the country's interest.

"Many people wanted parole as they have expectations for [his] role in the fields of semiconductors and vaccines amid the serious crisis," said Park Su-hyun, spokesperson for President Moon Jae-in, in a briefing on Friday after Lee left detention.

The parole means Lee is under the supervision of the Ministry of Justice until his full prison term ends and should report to authorities if he changes his residence or travels overseas for one month or more.

Analysts say that the government chose parole rather than a pardon as it wanted to have the same effect while limiting criticism. "The government may have felt burdened by a pardon for him. Parole, however, is a relatively easy option," said Park Sung-min, a veteran political consultant and head of Min Consulting.

Public opinion has been largely favorable toward leniency. Two-thirds of respondents supported parole for him in a poll conducted by YTN cable news channel last month.

A number of South Korean newspapers had called for Lee to be released from jail so that Samsung can make bigger investments in key areas such as semiconductors and step up acquisitions. Hopes have even been expressed that he could help the country secure more coronavirus vaccines by utilizing his extensive network of international contacts.

Yet, civic groups, including labor unions, criticized the release, saying that through it the government acknowledged that certain people receive special treatment.

"In exercising parole for Lee, the Moon Jae-in government abandoned values of fairness. It's an action which accepts a privileged class," said Yang Dong-gyu, vice chairman of the Korean Confederation of Trade Unions, during a protest in front of the Blue House after Lee's release.

Lee served 18 months, or 60%, of a two-and-half-year term for bribery and embezzlement. The Seoul High Court ruled that Lee embezzled 8.7 billion won ($7.4 million) of corporate funds to bribe former President Park Geun-hye in 2015. That trial was part of a corruption scandal that ousted Park in 2017.

The tycoon's release comes as Samsung faces tough competition from Taiwan Semiconductor Manufacturing Co., Intel and other rivals in the global chip industry. The three companies are keen to lead the market as semiconductors gain importance in the context of U.S.-China conflicts over trade and technology.

The South Korean tech giant, which leads the global memory chip market, also aspires to be the top logic chipmaker by 2030. It plans to spend 171 trillion won to accelerate research into cutting-edge semiconductor process technologies and the construction of a new chip plant.

China's Xiaomi, meanwhile, intends to dethrone Samsung from the top of the global smartphone market. Xiaomi recently surged past Apple to become the world's second-largest seller of the devices.

"Our current task is to cement the No. 2 position in the global market," Xiaomi founder and CEO Lei Jun said Tuesday during an online event to celebrate the 10th anniversary of the company's first smartphone launch. "We aim to become global No. 1 in three years."

Samsung on Wednesday unveiled its new foldable smartphone lineup, seeking to make the category more appealing and affordable. It said its global smartphone shipments came to 60 million units in the second quarter, compared to more than 70 million in the previous three months. The shortfall was due to suspensions at factories in COVID-clobbered Vietnam, a major production base for Samsung.

Lee's release appeared to provide little initial cheer to investors as shares in Samsung Electronics closed down 3.38% to 74,400 won on Friday.

But analysts say that with him now back at the helm, the company could be poised to make key spending decisions as early as next week.

"Samsung may announce its expenditure plan step by step," said SK Kim, an analyst at Daiwa Capital Markets. "Reshuffling of executives is also possible. Samsung shares are performing poorly as there are concerns for its growth."

Lee is far from the first South Korean captain of industry to run afoul of the law and then receive leniency.

His father, the late Samsung Chairman Lee Kun-hee, received two presidential pardons. The second one, in 2009, came after he had been given a suspended three-year jail term for embezzlement and tax evasion. Lee Myung-bak, the president at the time, subsequently tasked International Olympic Committee member Lee with helping South Korea win its ultimately successful bid to host the 2018 Winter Olympics.

Before that, Lee received a pardon from President Kim Young-sam in 1997 after a conviction and suspended two-year prison term for bribing previous President Roh Tae-woo.

Chung Mong-koo, currently honorary chairman of Hyundai Motor, in 2007 was sentenced to three years in prison for embezzlement and breach of trust, although an appeals court judge suspended the prison term, famously saying Chung was too important to the national economy to serve time.

SK Chairman Chey Tae-won, who was serving a four-year term for embezzlement, was pardoned in 2015 by Park in a Liberation Day clemency aimed at spurring investments by the conglomerate.

Such pardons highlight the generous treatment leaders of South Korea's influential chaebol, or family-controlled conglomerates, often receive. The thinking among senior politicians appears to be that it is better to let top business executives out of prison so they can contribute to the economy.

Park Yong-jin, a member of the National Assembly in President Moon's governing Democratic Party and a contender in next year's presidential election, on Monday expressed opposition to Lee being paroled, calling it an affront to the rule of law and an example of how the wealthy and powerful always have a way out.

During the past 10 years, Park said before the Ministry of Justice decision on Lee was announced, "only 0.3% of prisoners were given parole before completing 80% of their jail terms."

Last month, Jang Hye-young, who sits in the National Assembly -- South Korea's legislature -- with the progressive Justice Party, said paroling Lee would amount to a denial of equality.

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