South Korea’s special prosecutor is seeking an arrest warrant for Samsung Electronics vice-chairman Lee Jae-yong, on bribery charges.
The Lee Jae-yong case is linked to a scandal that led to the impeachment of South Korean President Park Geung-hye.
Samsung is accused of giving donations to non-profit foundations operated by Choi Soon-sil, a close friend of Park Geun-hye, in exchange for government favors.
The donations were allegedly made as Samsung sought political support for a merger.
Lee Jae-yong, known professionally as Jay Y. Lee, was questioned for more than 20 hours at the prosecutor’s office in Seoul last week.
Jay Y. Lee is currently vice-chairman of Samsung Electronics, but since his father, Lee Kun-hee, suffered a heart attack in 2014, he is considered de facto boss of the entire Samsung Group conglomerate.
The news sent Samsung shares lower, with Samsung Electronics stocks down 2% by midday in Seoul, and parent firm Samsung C&T down 0.8%.
A spokesman for the special prosecutor’s office acknowledged the arrest of Lee Jae-yong could be damaging for one of South Korea’s biggest business but said “while the country’s economic conditions are important, upholding justice takes precedence”.
The claims against Samsung center on a controversial merger between the electronics giant’s construction arm, Samsung C&T, and an affiliate company, Cheil Industries.
Prosecutors allege that Samsung gave money to a company co-owned by Choi Soon-sil and her daughter, in return for Park Geun-hye’s support for the deal.
At the parliamentary hearing in December, Samsung admitted giving a total of 20.4 billion won ($17.46 million) to the two foundations, but denied seeking favors.
During that hearing, Lee Jae-yong also said Samsung had made separate payments to help fund Choi Soon-sil’s daughter’s equestrian career, including buying an $850,000 horse – something the Samsung executive says he regrets.
Earlier in the day, the special prosecutor indicted South Korea’s National Pension Service (NPS) chairman Moon Hyung-pyo on charges of abuse of power and giving false testimony.
The NPS is the world’s third-largest pension scheme and was a major shareholder in the two Samsung Group affiliates. It is claimed Moon Hyung-pyo pressured the organization to back the deal – something the NPS has denied.