Samsung Group ex-chairman found guilty of tax evasion, spared jail term

(ATTN: CHANGES slug, UPDATES throughout with sentencing detail, quotes)
By Kim Hyun
SEOUL, Oct. 10 (Yonhap) -- South Korea's appeals court found former Samsung Group
chairman Lee Kun-hee guilty of tax evasion but dismissed a breach of trust charge
connected to a wealth transfer to his son, affirming a lower court's verdict that
spared him a prison sentence.

"The case of issuing stocks at a lower price to avoid inheritance and other taxes
cannot be seen as causing losses to the company," Judge Seo Ki-seog of the Seoul
High Court said.
The judge convicted Lee of tax evasion for hidden assets, calling the behavior
"very unjust."
The appeals court largely affirmed the lower court's verdict, sentencing Lee to
three years in prison, suspended for five years, with a 110 billion won (US$79
million) fine.
A special prosecutor demanded a seven year jail sentence and a 350-billion-won fine.
Sanctioned by the National Assembly, an independent probe led Lee to resign and
prompted a drastic overhaul in Korea's largest conglomerate.
In his final statement in early September, Lee appealed for leniency and
apologized to the people for "failing to meet their expectation and trust."
In the independent probe, special prosecutor Cho Joon-woong charged Lee with
evading 112.8 billion won in taxes by hiding assets under borrowed-name stock
accounts between 2000 and 2006 and orchestrating the murky wealth transfer to his
son and heir-apparent, Jae-yong, in the mid-1990s.
In the father-to-son transfer, Jae-yong acquired convertible bonds from Samsung's
de-facto holding company, Everland theme park, and shares of other Samsung
affiliates at "remarkably low" prices, the prosecutor said. The bargain takeover
helped him acquire group control without paying taxes and causing tremendous
losses to shareholders, he said.
The lower court, however, said that Everland shareholders' losses do not
constitute breach of trust by Lee.
The appeals court upheld the ruling, saying Jae-yong's purchase of the low-priced
convertible bonds "may have caused losses to shareholders but not to the
company," and thus do not constitute a breach of trust charge.
To shed its tarnished image, Samsung has dismantled its strategic planning
office, a key decision-making body, and relegated the former chairman's authority
to executives as part of efforts to increase transparency in the company, which
generates a fifth of the country's exports.