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The heir to the Samsung Group of companies has reportedly been arrested over bribery allegations, throwing the future leadership of the company into question.
South Korean officials took the Samsung Electronics vice-chairman and de facto head, Lee Jay-yong, into custody on 17 February, according to Reuters.
Lee’s arrest follows a decision by a South Korean court to issue a warrant in relation to an ongoing investigation into a corruption scandal involving the country’s embattled President, Park Geun-hye.
The court previously rejected a request from prosecutors for Lee’s arrest last month. According to reports, the prosecution said it had found additional evidence and brought further charges against Lee.
The South Korean prosecutors’ move to arrest Lee comes after it was alleged that he participated in payments made by Samsung to a friend of Park, to help garner government support in the company’s succession planning.
The investigation into the scandal could potentially see the country’s President lose her office. She is currently facing impeachment proceedings, and has had her powers suspended.
Both Lee and Samsung have denied the allegations.
Samsung has since released a one-line statement on Lee’s arrest, saying: “We will do our best to ensure that the truth is revealed in future court proceedings,” according to Reuters.
Now, Lee’s arrest may end up putting Samsung’s long-term leadership strategy and planning in question.
Lee, in his capacity as the conglomerate’s vice-chairman, has been seen as the company's de facto leader since his father, Lee Kun-hee, was hospitalised in 2014 after suffering a severe heart attack.
If Lee finds himself involved in a drawn-out legal battle with the Korean government, the company may end up facing a leadership vacuum that may give investors cause for concern.
Already, there has been unrest among some of the technology giant’s shareholders, as a push last year by activist hedge fund, Elliot Management, for the company to restructure in a bid to unlock investor value, highlighted.
In response, Samsung subsequently confirmed it would consider splitting itself into two separate entities and undertaking new public offerings in effort to appease shareholders.
Lee’s arrest comes after a series of setbacks for Samsung, with much of its focus in 2016 on remediating the fallout of its Galaxy Note7 debacle, which saw the company recall millions of its flagship smartphone model after battery problems caused some units to catch fire.
In January, the company revealed the results of a four-month internal investigation into the matter, revealing that irregularities in the manufacturing of the batteries Samsung sourced for the smartphone were behind the device’s overheating problems.
