Seoul – South Korean prosecutors sought an arrest warrant Monday for Lee Jae-Yong, the heir to the Samsung conglomerate, ensnaring the leader of the world’s largest smartphone maker in the country’s widening corruption scandal.
Lee’s possible prosecution is a fresh source of embarrassment for Samsung, whose reputation has already been damaged by fire accidents involving its faulty Galaxy Note 7 smartphone.
Samsung’s revenue is equivalent to a fifth of South Korea’s GDP and Lee’s arrest could have an “important” impact on the economy, a spokesman for the prosecutors acknowledged. “But we believe that achieving justice is more important,” he said.
Prosecutors investigating the corruption scandal said they asked a court to issue an arrest warrant for Lee Jae-Yong, the only son of Samsung group chairman Lee Kun-Hee.
The Seoul Central District Court said it would rule on the request on Wednesday.
The announcement sent the share price of Samsung Electronics — South Korea’s largest listed firm by value — falling 2.14 percent, shaving more than $5 billion off its market capitalization.
The political scandal centers on President Park Geun-Hye’s secret confidante Choi Soon-Sil.
Choi is accused of using her ties with the president to force top local firms into “donating” nearly $70 million to dubious non-profit foundations which Choi then used as her personal ATMs, in exchange for political favors.
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.
Lee, 48, who was questioned in a marathon 22-hour session last week, is accused of bribery and embezzlement for approving decisions to pay Choi 43 billion won ($36.4 million), and of perjury at a parliamentary hearing, the prosecution spokesman said.
In a statement Samsung said the prosecutors’ decision was “hard to understand.”
“There was no support that sought something in return,” it said.
“This is a big crisis for us,” Yonhap news agency quoted an unnamed senior Samsung executive as saying.
“We have to make aggressive investment and merger and acquisition decisions to race ahead of competitors.”
“But we are afraid that the latest development would cause great delays in our decision-making process.”
However, Greg Roh, analyst at Seoul-based HMC Investment & Securities, said the firm had a “very well-organized management system” and was not driven by “a certain personality.”