Aju Business Daily

SEOUL -- The troubled son and heir apparent of CJ Group Chairman Lee Jae-hyun walked free after a court handed down a suspended jail sentence on charges of smuggling marijuana, which is banned in South Korea as a harmful and addictive substance. The drug case came on the heels of a campaign by the ailing chairman to expedite the transfer of group ownership.

A criminal court in the western port city of Incheon sentenced Lee Sun-ho, 29, to three years in prison with a stay of execution for four years. He was arrested four days after customs officers discovered marijuana from his traveling bag on September 1 when he returned from a U.S. trip. His suitcase contained liquid marijuana in cartridges while cannabis in the form of candy and jelly was found from his backpack.

Cannabis products made in the form of pills, drinks, injection and smoke have been used widely abroad to treat illnesses such as glaucoma, asthma, arthritis, and to slow down progress in Alzheimer's disease and growth of cancer cells. But South Korea regards it as a harmful and addictive substance. Smoking or consuming marijuana could be sentenced to less than five years in prison.

After graduating from Columbia University in the U.S., Lee Sun-ho joined CJ Cheil Jedang in 2013 and worked as a bio business team manager before changing his post in May to head the food strategy planning team. CJ Cheil Jedang, a key subsidiary of the food and entertainment conglomerate, is the world's largest producer of lysine, an amino acid used as additives for animal feed and food additives.

The conglomerate groups subsidiaries specializing in food, food service, pharmaceutics, biotechnology, entertainment, media, home shopping and logistics. CJ E&M is a key distributor and exporter of Hallyu (Korean cultural wave) in Asia. Other notable CJ subsidiaries include CJ CGV, a cinema chain, and CJ Olive Networks, which provides information technology services.

CJ Olive Networks is owned by Lee Sun-ho and his sister Lee Kyung-hoo, executive vice president of CJ ENM, 17.97 percent and 6.91 percent, respectively. CJ Group decided to separate CJ Olive Networks into Olive Young and an IT sector by November 1. The IT division will be incorporated into CJ's 100 percent subsidiary. As a result, Lee Sun-ho and Lee Kyung-hoo will hold a 2.8 percent and 1.2 percent stake in CJ Corp., the group's holding company, respectively.

The group used to expand through aggressive mergers and acquisitions before Lee Jae-hyun was sentenced to four years in prison in 2014 on conviction of embezzlement, tax evasion and breach of trust. The sentence was reduced to 30 months in December 2015 and Lee was granted a presidential pardon in August 2016. After his return to management in 2017, the chairman resumed aggressive business expansion.

Lee Jae-hun, who has undergone a kidney transplant, claims to suffer from multiple illnesses, including a degenerative neurological disease. He was a grandson of Samsung Group's late founder Lee Byung-Chull and inherited CJ Group which was officially separated from Samsung in 1997.

Top officials of South Korea's family-run business conglomerates, or "chaebol", which dominate the national economy, have made regular court appearances. Some have received heavy jail terms, only for them to be pardoned or released on early parole in light of their "past contributions" and importance to future economic prosperity.

Conglomerates were once described as the engine of prosperity and credited for powering the post-war economic miracle, despite their autocratic leadership and dynastic succession practices. However, they are now under growing pressure to enhance corporate governance, protect the interests of minority shareholders, and reduce their dominant role in South Korea's economy.

The mental attitude of some third-generation offsprings of chaebol owners has failed to meet the demands of society. Arrogant attitudes by the offsprings of conglomerate owners were highlighted by the daughters of Hanjin Group's late patriarch Cho Yang-ho.