Samsung heir apparent and de facto leader Lee Jae-yong, known in the western world as Jay Y. Lee, has received a sentence of five years imprisonment for bribery and embezzlement.
Lee, the son of Samsung chairman Lee Kun-hee who fell into a coma around three years ago, has served as the de facto boss of Samsung, the biggest business empire of South Korea.
Samsung Boss Sentenced To 5 Years In Prison
In January, Lee was arrested for crimes related to the corruption scandal that resulted in the impeachment of disgraced South Korean President Park Geun-hye last December.
The Samsung chief was accused of making illegal payments worth $36 million to a charitable foundation that was controlled by Choi Soon-sil, a close friend of Park. In return, Lee allegedly received political favors, including the ability to overhaul Samsung's shareholding structure to help keep his family in control of the conglomerate.
Samsung, while popular in most of the world for its smartphones and other electronic devices, including the recently announced Galaxy Note 8, also has businesses in insurance, shipping, and pharmaceuticals.
What Does Lee's Imprisonment Mean For South Korea And Samsung
More than two decades ago, prosecutors accused Samsung's chairman, Lee's father, for bribing the president, but he was later given a presidential pardon. A decade ago, he was once again indicted for tax evasion and embezzlement, but he again escaped imprisonment.
Lee's imprisonment, however, signals a massive change in the relationship between the government of South Korea and the country's massive conglomerates known as chaebols, which control over 80 percent of South Korea's gross domestic product. With the Samsung boss arrested, it now appears that chaebols, even the biggest one of them all, are no longer untouchable.
As for Samsung itself, it may have to scramble for a new leader as there is doubt that Lee will receive a pardon, as South Korea's new president, Moon Jae-In, won the election on the back of an anti-corruption campaign.
The short-term effect of the verdict against Lee will be minimal due to the decentralized Samsung management. Lee was not involved in the day-to-day operations of the company, so Samsung will be business as usual even in his absence.
Lee has been viewed as the lynchpin of the company's long-term strategy, and the focal point of the business relationships of the company across the world. This allowed him to seek out opportunities for the conglomerate, a role that will be very hard to find a replacement for.
The imprisonment of Lee, however, will also likely cause a massive internal struggle for who will be the next Samsung leader, at a crucial time when the company is looking to recover from the Galaxy Note 7 fiasco with the Galaxy Note 8.