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Samsung vice chairman Jay Y Lee court verdict


Jay Y. Lee, co-vice chairman of Samsung Electronics, right, is escorted by a prison officer as he arrives at the Seoul Central District Court in Seoul, South Korea, on Monday, July 10, 2017.

SeongJoon Cho | Bloomberg | Getty Images

Jay Y. Lee, co-vice chairman of Samsung Electronics, right, is escorted by a prison officer as he arrives at the Seoul Central District Court in Seoul, South Korea, on Monday, July 10, 2017.

A court in South Korea on Friday will rule if Samsung’s de-facto chief Jay Y. Lee is guilty of corruption following a trial where he was accused of paying bribes to gain government favors for the conglomerate.

Reuters reported that prosecutors have demanded a 12-year jail sentence for Lee and that he also faces charges of embezzlement and perjury. Lawyers expect an appeal that could go all the way to the Supreme Court, with a final ruling likely in 2018, according to Reuters.

Samsung Electronics shares were down 0.76 percent in morning trade.

Lee, the 49-year-old scion of the family behind South Korea’s largest chaebol, was taken into custody and held by authorities since February. Chaebols are South Korea’s large, family-run conglomerates that have historically played an important role in the country’s economic development.

The special prosecutor’s office accused Lee of bribing a close friend of former President Park Geun-hye to gain government favors for Samsung.

Both Lee and Samsung denied any wrongdoing in February. The official stance was that Samsung admitted to giving money to foundations at the center of a corruption scandal that ultimately saw Park removed from power, but the company maintained it received nothing in return.

Samsung also dismantled its corporate strategy office that handled key decisions for the conglomerate in light of the scandal. Top Samsung executives, including Vice Chairman Choi Gee-sung and President Chang Choong-ki also resigned.

Experts previously told CNBC that the verdict on Lee was unlikely to affect Samsung’s day-to-day business. That was because Lee is not the global face of the brand, according to one analyst.

In July, the flagship brand Samsung Electronics reported a second-quarter operating profit of $12.67 billion due to a boom in its memory chip business. Samsung also remained the world’s top smartphone vendor by shipment and earlier this week, it unveiled its newest Galaxy Note 8 handset.

But a guilty verdict could cast fresh light on the future of chaebols that have long enjoyed close relationships with South Korea’s political elite.

Chaebols control vast networks of companies through a circular holding structure and their control typically exceeds cash-flow rights — that means families often wield undue influence over group companies in spite of small direct shareholdings.

While those conglomerates have been responsible for propping up South Korea’s economic growth in the past, many citizens have long demanded political authorities curtail their power.

—CNBC’s Nyshka Chandran contributed to this report.

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