Samsung Electronics' (SSNLF) link to a scandal that has gripped South Korea and lead to the impeachment of its President deepened Tuesday after authorities formally charged the heir to the company's founder with bribery and embezzlement.
Jay Y. Lee, vice chairman of the executive board and four other senior Samsung executives were charged Tuesday in Seoul, with Lee facing and added allegation of perjury to parliament. Lee, 48, has been the subject of an investigation into a cash-for-influence scandal that brought down Park Geun-hye late last year.
Samsung stock closed 1% higher at 1,922,000 won each Tuesay, against a 0.029% advance for the benchmark KOSPI Composite index. Year-to-date, however, the shares are still holding on to a 5.1% gain.
Vice chairman Lee, who has effectively been in charge of the Samsung Group since his father (chairman Lee Kun-hee) was incapacitated by a heart attack in 2014, is accused of directing 43 billion won ($37 million) to entities linked to Choi Soon-sil, a confidante of President Park.
The payments were allegedly made to help win government approval of a 2015 merger between Samsung holding company Cheil Industries and construction firm Samsung C&T Corp., a move that solidified Lee's control over Samsung.
The arrest comes as Samsung is grappling with an increasingly competitive smartphone market and attempting to put the ill-fated release of its Galaxy 7 behind it.
Earlier this week, Samsung disappointed some fans by choosing to not release their much-anticipated Galaxy S8 device at the Mobile World Congress in Barcelona and instead unveiled two cutting-edge new tablets signal a move away from the company's tradition of announcing its flagship Galaxy S smartphone series at the MWC every year.
Samsung is expected to release the Galaxy S8 at a smartphone-related event on Mar. 29 in New York City.
Park Geun-hye was impeached on Dec. 9 over allegations that she used presidential influence to curry donations for a foundation ran by Choi Tae-min, who has since been arrested and placed on trial for offences including fraud. It has been alleged that she used her connections to South Korea's then president to pressure companies to make donations to her foundation.
Prosecutors will conclude their investigation on March 6 and the country's Constitutional Court is expected to rule on Park's impeachment sometime later next month.