Inheritance Samsung: 1. My kingdom for a horse

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February 2017. Winter time in South Korea.

Bright sunshine, a chill breeze, just above freezing.

In central Seoul, a blue prison bus rolls to a stop.

Shhh. Peering out through its tinted windows, the accused man can see what is waiting for him.

Police and photographers line the road. Protesters too.

In a moment, the doors will open and he'll have to face them.

But E.J. Young, known as J.Y. Lee, isn't your usual kind of prisoner.

He's airing waiting to Samsung, a global tech giant, one of the biggest names in phones and TVs,

but an empire built on much more. Memorieships, construction, insurance.

It's South Korea's biggest company. It's biggest success story by far.

48 years old, J.Y. Lee is one of the country's richest, most powerful people.

One of the most powerful people in the history of technology.

Jeffrey Cain is author of the book, Samsung Rising. You'll hear a lot from him this series.

He's one of four Samsung watchers who will be helping us with this incredible story.

I remember that moment well. I was there. I was outside the courthouse.

This is one of the most significant moments ever in the history of South Korea.

I remember this moment vividly too. I had just set up a news bureau in Seoul for NPR,

the American public broadcaster. The story captured the public's imagination and attention

and screens everywhere and train stations even showed these images.

For months, prosecutors have been building a case to charge J.Y. Lee with bribery.

They'd questioned him for almost 24 hours straight,

but the courts had refused to issue an arrest warrant. That is until yesterday.

He'd spent the night locked in a single cell.

With just enough room for a mattress on the floor, a desk, and reportedly a TV made by,

get this, Korean rivals LG.

Samsung was founded by J.Y. Lee's grandfather nearly eight decades ago.

Today, it's less a family business or like a dynasty. Over the years, J.Y. Lee's father

and his grandfather before him, both Samsung Chairman, had had their own brushes with the law.

But they had never spent the night in a prison cell.

They are the equivalent of royalty. This moment is so significant because it shows

that they are no longer untouchable.

As the prison busses door slides open, guards and navy uniforms step onto the asphalt.

Suddenly, J.Y. Lee can hear the shouts more clearly.

Watching is Jake Kwan, then a freelance journalist. He's now part of the BBC's news team in Seoul.

It was crazy how much media friends he was around this. This is the most powerful economic leader

of South Korea being brought down. Guards on either side take hold of his arms.

As they do so, their hands partially obscure the white rope, wound tightly around J.Y. Lee's

elbows and then around his back and waist and wrists. And there he is getting off the bus.

His arms and his torso, they're all bound up. A bit like handcuffs, tying J.Y. Lee's arms to his

sides, his hands together. The indignity of this moment. After all his family has done to build

Samsung into a truly mighty global power. After all they have done to help his country out of

poverty, to make it respected around the world. I did interview a family member from Samsung.

This is what they often say. Look, we built the nation and without us, South Korea, as it

exists today, would simply not be here. We have worked so hard, we have done so much and we've

suffered through past dictatorships, but we did it for the country. We didn't just do it for ourselves.

And why do I have to take this public humiliation?

J.Y.'s father hadn't faced any of this when he took over. Sure, there had been a big family fallout,

but that had been private. But today Samsung is a much larger and more powerful company.

And South Korea is a very different country.

J.Y. Lee is in a tough position because he has been groomed for three decades now to become

the heir to the Samsung Group. His father and his father's aides have gone out of their way

through various stock sales, various troubled mergers and acquisitions within the Samsung Group,

designed to solidify his hold on the company.

That's how these Samsung reshuffles have been widely interpreted,

but they hadn't finished the job. And so J.Y. Lee had taken a risk.

A risk that had left him facing a multi-million dollar bribery allegation.

J.Y. walks head-bout through the basement entrance to the prosecutor's office.

The guards in their apparent haste to negotiate the gauntlet of TV cameras, microphones,

and reporters are almost carrying J.Y. Lee now.

His eyes remained fixed on the floor. He didn't really look at the crowd of the journalists there.

His face looked very stern. Samsung has pretty deep pockets. They can hire some of the best

lawyers in the country. So it was quite as shocked and surprised to see him actually taken into custody.

It is a cataclysm for the nation of South Korea because nobody has ever seen a leader of any

conglomerate, including Samsung, marched into court, marched into his detention center in this way.

He has been stripped of all royalty, stripped of the usual decorum that comes with being

the heir to the Samsung Empire, and now he is just like everybody else facing trial in the

greatest corruption scandal of South Korea's history.

J.Y. Lee is about to face prosecutors for yet more questioning.

As the doors to the court building's cramped service lift close, one last blinding burst of

camera flashes sends him on his way upwards. They've got 10 days to charge or release him.

If J.Y. can avoid jail, his path to power will finally be clear.

He will take over the South Korean tech giant.

But if he's found guilty, his ran could be over before it's even begun.

Everything rests on J.Y. holding his nerve.

I'm Elise Hugh. I lived and worked in Seoul, the South Korean capital for nearly four years,

covering this story. From the BBC World Service, this is inheritance.

The stories of the families behind some of the world's biggest companies.

Our journalists have scoured the archives, combed through memoirs, and handpicked experienced

observers to take you inside these dynasties. At times we'll recreate, as faithfully as we can,

the pivotal moments, all to understand how powerful empires are built and passed on.

Season 1, Samsung. Episode 1 of 10. My Kingdom for a Horse.

It's early 2016, a secluded woodland estate in southern Germany. Squeezing its way along the

narrow lanes is a lorry containing an important delivery.

Having safely reached its destination, a huddle of former farm buildings with cream walls,

timber beams, and high-pitched roofs, a team compares to unload the cargo.

The lorry doors open. A ramp is lowered, and out walks a 14-year-old Dutch mare.

She sniffs and surveys her new home.

Well, that's what I imagine she did.

We don't know exactly how this scene unfolded. She might have arrived in the

equivalent of a rock star tour bus, blacked-out windows, a limitless supply of hay bales,

or she might have been wedged into a horsebox, little bigger than a pickup truck.

We'll occasionally have to fill in the gaps in the story. We'll let you know whenever we do,

because parts of the Samsung story have never been made public.

Anyway, the horse. According to Jae-yeon Lee, reporter with South Korean newspaper,

Hunkure, it was one of three that arrived together.

Really fancy horses? I remember one of the horses only because it was so much more expensive,

than I thought a single horse could cost. A horse named Vatana V, which cost about $800,000.

Vatana V, a grand pre-metal winner, the pinnacle of the sport of Jersage.

But what's important for us is the horse's new owner.

She had been training in Germany, building her career. She had been a champion in numerous

equestrian tournaments around the world. She's a 19-year-old South Korean equestrian,

who won team gold, riding a different horse two years earlier at the Asian Games.

And she wanted to go to the Olympics. And so, the way to do that is to get a top-level horse.

But how on earth does a 19-year-old get a hold of almost a million dollars to spend on one horse?

Well, she didn't.

About six months earlier, a group of Samsung executives had flown to Frankfurt to sign a deal.

They met the representatives of a woman whose name was Twa Shun-Shi-O.

This woman is in charge of core sports international, the sports consulting firm registered in Germany.

It's the company that Samsung is in town to do a deal with.

But what was mysterious is that her so-called sports company had just been founded quite recently.

The previous day, in fact.

It wasn't the type of company that a major conglomerate like the Samsung group would want to shower with cash.

Despite the lack of trading history, Samsung execs agreed to sponsor

core sports international in a deal worth about 19 million dollars.

They announced they will fund a dozen horses, a team of trainers and coaches,

all in support of South Korea's equestrian hopefuls.

But it later turns out that virtually all the money Samsung paid to core sports international

goes to one single rider, the future owner of Vittana V.

And a young equestrian who happens to be the daughter of the woman in charge of the sports

consulting firm.

Cho Shin-Shil wasn't very well known in South Korea, but this woman was connected to the South Korean

President Park Gun-Hae. Her name was spotted in reports here and there, but

people never really assumed that she might be that important of a figure.

We'll hear more about Chasin-Shil later in the series, but for now,

it's enough to know that she's a powerful figure who has the ear of the president.

So when her daughter needs a horse to take her dressage up a gear, naturally she just asks her

buddy, the president, for help, which is where Samsung and JY Lee come in.

Even to people who were following events later, it wasn't clear what exactly was going on here

and how Samsung might be rewarded.

Prosecutors will allege a few months later that Samsung agrees to the equestrian deal because

JY Lee owes the president a favor. Because they'll say she's just helped to navigate a crucial

and extremely controversial business merger that will define his future, his family's future.

The future of Samsung itself.

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The tension was palpable in the air.

It could have easily descended into a brawl.

In central soul, a crowd is building.

It's July 2015, six weeks before the equestrian deal.

You could feel the anger and the frustration and the resentment.

Hundreds of investors cram into the fifth floor conference hall.

Middle-aged men and business suits mix with others in t-shirts and trainers.

Outside several hundred more jostle for space, craning their next.

I wasn't there, but Jeff's and other reports suggest the mood is tense.

A ripple of expectation runs through the crowd as a man arrives,

smartly dressed in a navy suit and sky blue spotted tie.

This is the person they've been waiting for.

The co-chief executive of Samsung Construction and Trading,

Samsung C&T, a major part of the Samsung Empire.

One account describes how an older man in white traditional robes

starts shouting something from the waiting crowd.

He's clearly furious.

He rushes towards the exact.

Samsung security tackle the man in white.

There's a brief tussle before he's forcibly removed from the venue.

Months of argument and acrimony have built up to this.

Shareholders will vote on the merger of Samsung C&T

with a company called Cheyue Industries, which was the de facto holding company of Samsung.

Cheyue Industries is a kind of parent company controlled by the Lee family.

Its main role is to oversee and invest in lots of other companies.

J. Wiley, the heir to the empire,

owns just under one quarter of this holding company, Cheyue Industries.

He doesn't own any of Samsung C&T.

He will, but only if this merger goes through.

The deal on the table for Samsung C&T shareholders is that for every one of their shares,

they would receive only about one third of one share in the new entity.

And that offer?

Well, it hasn't gone down so well.

It was a horrible deal for anybody who owned a piece of Samsung C&T.

The merger terms propose that Samsung C&T is worth only one third of what Cheyue Industries is.

That's not what the financial markets say.

And it's certainly not what many shareholders believe.

And the person that this benefits is J. Wiley.

It benefits the Samsung Lee family.

Because if the merger goes through, J. Wiley, who's already the majority shareholder in Cheyue,

will also own the biggest single stake in the new company.

Some shareholders suspect that he's trying to devalue the merger target.

Samsung C&T.

It's something J. Wiley denies,

but the allegation will hang over him for the next decade.

Something we'll come back to later in our series.

These shareholders claim that what he's after is not only the cheapest price in this deal.

It's control.

Control over something even more important than the merged businesses,

which will become the new holding company.

Control over an even greater source of power and wealth.

Samsung electronics.

Although Samsung electronics is the core company of this conglomerate,

J. Wiley does not own a controlling share of it.

J. Wiley already owns part of this smartphone and TV side of the business,

but his grip is not secure.

Because he's in the middle of a succession struggle.

To take control of the business empire when the aging and ailing current chairman dies.

And it's not just angry shareholders he has to contend with.

Lately, some in the media have been talking up his eldest sister.

They say that perhaps she would be a better future chairman.

And then there's his cousin side of the family.

Some of them unpredictable and indignant, believing they were denied their fair share of the

business when Samsung's first chairman died decades ago.

That is why this deal is so important.

With this one merger, J. Wiley can secure his position at the top of the whole Samsung group.

And because Samsung's CNT owns a small but crucial stake in Samsung electronics,

he can also assume power over this, the jewel in the crown,

the company and the family's key source of wealth.

Back in the packed conference hall, the atmosphere is vibrato.

There were protests in the room.

People erupted and challenged Samsung and said,

why would you do this merger?

You're killing us, you're devastating us.

People had to be escorted out or worn by security.

That's what I heard.

Eventually, the Samsung CNT bosses address the audience,

making the case for the merger.

And then the representatives of Elliott Management stood up.

Elliott Management, a New York-based hedge fund that owns just over 7% of Samsung CNT.

It has been campaigning aggressively against the deal.

They saw it as a manipulation, as devaluing of their shares and the value of the company.

The hedge fund has filed multiple lawsuits to try and stop this boat going ahead.

They tried to appeal to the South Korean public.

They were trying to make the case that this merger is not in the interest of South Korea.

An extremely bold move.

I mean, something that you don't see often in South Korea,

because these are national symbols of economic power.

Samsung had pushed back, framing the deal as a matter of national pride,

encouraging South Koreans to stand up to this foreign bully.

Samsung sent employees out to the homes of various small-time shareholders.

They would knock on the door of a retiree who might own a few, you know,

handful of shares, and they would serenade them with the merits of the merger.

They would also buy them fruit, which is a traditional gift in South Korea,

a symbol of goodwill.

And they would say, please vote for the merger.

The shareholders wait anxiously as the votes are counted.

What they don't know, what some of them fear,

is the result of a vote that's already happened.

The National Pension Service, which oversees the retirement savings of millions of South Koreans,

and is one of Samsung's CNT's biggest shareholders,

held its own secret ballot on the deal a week ago.

Its vote could have a decisive impact on the outcome.

After what seems like an age, a Samsung executive walks to the stage to announce the result.

The merger, he says, has passed.

It was just like a gasp across the country. I remember it distinctly.

The National Pension Service in a shock decision voted for this merger.

And it was such a mysterious decision. I mean, the market analysts,

the economists were looking at this and saying, why would they vote to lose money?

Especially if you're paying out the retirement savings of people.

It won't take long for the head scratching to lead to accusations of foul play.

The National Pension Service isn't run day-to-day by the South Korean government,

but it is ultimately answerable to ministers.

President Pockenay will later deny it, and so will the pension fund itself.

But there are suspicions that she's used her influence to help push this deal through.

And in return, Jay Wiley, the Samsung Air, has pledged to help her, the president,

with a new found interest in horses.

Two favors will come back to you.

The National Pension Service's vote isn't the only one to raise eyebrows.

Amongst the many proxy votes cast in favor of the deal is one from Samsung's current chairman,

the man who transformed the company into the global tech giant we all know.

Eganee, known as KHLE.

The only trouble?

He's not been seen in public for more than a year.

Rumors are spreading across Korea that he's dead.

Samsung told us that by the time of his proxy vote in the merger,

Chairman KHLE had broadly delegated the voting of his rights as a shareholder in Samsung companies,

in such a way as to align with management's stances.

This has been episode one of 10 of Inheritance, Samsung, from the BBC World Service.

Coming up in the rest of the series.

This was the moment that placed Samsung on the map as a cool brand, not just a tech maker.

The Samsung name was everywhere.

And then he had those workers smash the phones with hammers and then set them on fire.

On my group chat, it was all like a ping, ping, ping, ping, ping, ping.

He always thought that he and his father could reconcile.

So basically he was saying, you know, just give back what's mine.

The man I was speaking to simply made this hand gesture suggesting that whole of South Korea will explode.