Samsung heir awaits court ruling on arrest

© Ken Wolter – 123RF.com

Lee Jae-Yong, 48, was tight-lipped as he left the Seoul Central District Court after a four-hour hearing, television footage showed. He declined to speak to reporters.

The potential detention of the de facto head of a giant conglomerate - whose revenues are equivalent to a fifth of the country's GDP - raised concerns over its possible wider impact.

Samsung is the country's largest exporter and world's biggest smartphone maker, and the top-selling Chosun Ilbo newspaper said the firm could face a "global beating" from authorities in major trading partners, including Washington.

"If Lee faces legal punishment, the US government could review measures to slap sanctions on Samsung under the Foreign Corrupt Practices Act (FCPA)," the paper said in a front-page article.

It warned that Samsung's global brand image - which took a pounding over last year's Galaxy Note 7 recall debacle - would also be further tarnished.

Prosecutors said Monday they would seek an arrest warrant for Lee on suspicion of bribery, embezzlement and perjury in connection with the scandal which has already seen President Park impeached.

It centres on Park's secret confidante, Choi Soon-Sil, who is accused of using her ties with the president to coerce top local firms to "donate" nearly $70 million to dubious non-profit foundations which she used for her personal benefit.

Samsung is the single biggest contributor to the foundations and separately paid Choi millions of euros, allegedly to bankroll her daughter's equestrian training in Germany.

In total, Samsung is allegedly implicated in payments of 43 billion won ($36.4 million) although Lee has denied any wrongdoing during a 22 hour marathon questioning last week.

"The key point is whether any favours were given. We explained our position very clearly," Lee's attorney told reporters after Wednesday's hearing.

The court ordered Lee to wait at a detention facility on the outskirts of Seoul for the judge's ruling, a court spokesman said, with the decision not expected to be reached until late Wednesday night or early Thursday morning.

Lee became Samsung's de facto leader after his father suffered a heart attack in 2014. If the court approves his detention he would be the first South Korean senior executive to be arrested over the scandal.

Prosecutors in particular are probing whether Samsung's payments were aimed at securing government approval for a controversial merger of two of its units in 2015. The combination of Cheil Industries and Samsung C&T was seen as a key step towards ensuring a smooth third-generation power transfer to Lee.

It was opposed by many investors who said it wilfully undervalued Samsung C&T's shares. But it was backed by the National Pension Service, a major Samsung shareholder.

Park, accused of colluding with Choi to extract money from the firms and letting the friend meddle in a wide range of state affairs, was impeached by parliament last month.

Both Park and Choi, who is on trial for coercion and abuse of power, have denied any wrongdoing as the Constitutional Court is reviewing the validity of the impeachment. If the court upholds the impeachment, a presidential vote will be held in 60 days, with Park immediately losing executive privilege that protects her from criminal indictment.

South Korea's central bank earlier this month cut its growth forecast for this year to 2.5%, citing "deteriorations in economic sentiment".