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Samsung heir formally accused of bribery

South Korean prosecutors have officially requested an arrest warrant for Jay Y. Lee, Samsung's de facto leader since 2014, in an alleged political-bribery scandal.

Jay Y. Lee, de facto head of Samsung Group.

Pool, Getty Images

A South Korean prosecutor has requested an arrest warrant be issued for the acting head of Samsung Group, Jay Y. Lee.

Lee is accused of bribing the suspended South Korean president, Park Geun-hye, in the form of multimillion- dollar donations to groups allegedly connected to Park, the New York Times reported Sunday.

Donations were made to two foundations controlled by Park's friend and confidant, Choi Soon-sil. Special prosecutor Park Young-soo last week made the accusation that these donations were bribes, given in exchange to get the South Korean pension fund to back a 2015 merger between two of Samsung Group's holding companies.

The merger, between Samsung's C&T construction and trading business and its Cheil Industries chemicals business, helped solidify the Lee family's hold on Samsung Group. The merger was polarizing among shareholders, and the South Korean pension fund, which held an 11.6 percent stake in Samsung C&T and a 5 percent stake in Cheil Industries, was key in it getting approved.

The company denies the accusations. "Samsung did not make contributions in order to receive favors", a spokesperson said. "We find it hard to accept the special prosecutor's argument that Samsung has made improper requests related to the merger of Samsung affiliates or the leadership transition. We believe the court will make the appropriate judgment on this matter."

Lee is the vice chairman of Samsung but has been acting as the company's de facto head since his father, Lee Kun-Hee, suffered a heart attack in 2014.

On Monday in a public hearing, Choi denied any part of the merger. "Even if I knew, I could not have passed on any information because I have no knowledge about mergers or hedge funds, anything like that, in the first place," she said, according to Reuters.

Last month, Lee testified in a National Assembly hearing that he had nothing to do with Samsung's choice to make $17 million in donations to Choi, reported the New York Times. Instead, he suggested the company was a victim of extortion rather than a participant of bribery.

On Monday, prosecutor Park said he had asked a Seoul court to issue an arrest warrant for Lee. The court has not yet granted the request, according to the New York Times.

A formal accusation of presidential bribery by Samsung's leader is a bad start to 2017, a year in which Samsung needs to be strong after last year's Galaxy Note 7 fiasco. After a number of devices caught fire around the world, the company was forced to recall millions of Galaxy Note 7 devices at the cost of billions of dollars.

South Korea's government has been in an uneasy state over allegations that President Park confided in her friend Choi, who has no official role in the government. Choi in turn has been accused of extorting millions in bribes. Prosecutors have indicted Choi and two of Park's former aids for extortion, fraud and divulging classified information. Millions of protesters have gathered on the streets to demand Park's ouster, and the Korean National Assembly last month voted to impeach her.

Update 6:40 p.m. AEST / 12:40 a.m. PT: Added public hearing comment from Choi.

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