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Samsung chairman’s appeal against 5-year jail term for corruption gets derailed

Over the past year, Samsung Group has been embroiled in a political scandal that dominated headlines in South Korea, which ultimately saw the impeachment of president Park Geun-hye. Samsung’s acting chairman Lee Jae-yong was accused of making donations to nonprofit foundations in exchange for political favors, in order to smooth the path for a controversial merger approved in July 2015. After going on trial, he was found guilty of corruption in August 2017.

Here’s everything you need to know about the case.

Guilty verdict and appeal

In August 2017 Lee Jae-yong, Samsung’s billionaire acting chairman, and the third-richest man in South Korea, was found guilty of corruption and sentenced to five years in prison. The court ruled he approved bribes from Samsung to secure government backing. The five-year sentence is lower than the 12 years sought by the prosecutors, and Lee’s lawyers have appealed the verdict, which may be referred to South Korea’s supreme court in 2018.

The court ruled Lee Jae-yong approved bribes from Samsung to secure government backing.

Lee’s appeal hit problems in December, when president Park’s former secretary said on the stand Lee had visited the president in 2014. Lee’s defense during the trial claimed he had only met the president once and for only a few minutes. A further meeting, not revealed by Lee before, potentially strengthens the prosecutors case against him, and his attempts to cover up the bribery. The appeal is set to close at the end of this year, with a final verdict expected in January 2018.

The trial was the culmination of a special criminal investigation that first became widely known in November 2016, and has since seen the impeachment of former South Korean president Park Geun-hye. Lee was found guilty of paying billions in bribes to Choi Soon-sil, friend and confidant to the former president, in return for Park approving a Samsung merger that would give him more control over the company.

His five-year jail term is the longest given to any top executive at a South Korean conglomerate, but there is still the possibility the sentence will be suspended. However, new president Moon Jae-in is taking a hard stance on crime of this nature, making a pardon less likely.

Lee’s conviction came just days after Samsung launched the Galaxy Note 8 at a glitzy event in New York.

The background

The story behind Lee’s eventual guilty verdict is fascinating. Samsung is just one of several South Korean conglomerate businesses accused of paying bribes for political favors, a scandal which formed part of the investigation into South Korea’s president Park Geun-hye, and her involvement in extorting money from major corporations.

Park was accused of assisting in an extortion scheme with unofficial presidential aide Choi Soon-sil. More than 50 businesses were allegedly pressured to make donations potentially worth $69 million to sporting foundations backed by Choi, which were set up following the Samsung merger, then used for personal financial gain and in exchange guaranteeing approval of controversial deals.

South Korea's ousted President Park Geun-Hye

South Korean Presidential Blue House via Getty Images

Samsung Group’s Lee Jae-yong first answered questions about his involvement in December 2016, and again on January 12, 2017. The focus was on bribery, embezzlement, and perjury. Emails stored on a tablet computer owned by Choi Soon-sil allegedly showed how Choi received funding from Samsung, and how the money was eventually spent. Samsung’s funding came in return for Choi pushing Park to approve its 2015 merger, which in turn secured Lee’s control over Samsung Electronics.

During the December 2016 questioning, it was revealed that in 2015 Samsung gave more than $17 million to Choi’s foundations, paid for a horse as a gift to Choi Soon-sil’s daughter valued at $850,000, and paying $3 million for her equestrian training. At the time Lee said he wasn’t aware of the payments until recently, and stated they weren’t pay-offs or kickbacks. He apologized for paying for the horse, and said Samsung would take responsibility if any involvement in the scandal was revealed.

Lee Jae-yong’s questioning lasted for 22 hours, and on January 16, an arrest warrant was sought for perjury, bribery, and embezzlement, and based on him, “giving or promising to give some $36.3 million worth of bribes to Choi Soon-sil in return for the state-run pension fund’s backing of a merger of two Samsung affiliates.” The donations, which went to Choi’s equestrian foundation, were the largest made by any business group.

Trial and impeachment

Ousted President Park Geun-hye was arrested at the end of March 2017, after losing her immunity.

Lee’s arrest came in mid-February after charges were expanded to include “hiding the proceeds of a criminal act.” Lee Jae-yong was taken into custody at the Seoul Detention Centre. “It is acknowledged that it is necessary to arrest [Lee Jae-yong] in light of a newly added criminal charge and new evidence,” the court said in a statement. Lee Jae-yong’s trial began on April 7, where he was photographed being led into court in handcuffs.

South Korea voted to impeach president Park Geun-hye at the end of 2016, and she was arrested at the end of March 2017, after losing her immunity. Choi Soon-sil denies any wrongdoing. Park, Choi, and Lee were at one time all being held in the same detention center, but have faced trial separately.

The conviction of Samsung’s Lee Jae-yong may provide more evidence for the prosecutors to use against former president Park.

Implications for Samsung

Lee Jae-yong is the billionaire grandson of Samsung founder Lee Byung-chul, and the only son of Lee Kun-hee, the current chairman of the Samsung group. Since his father’s heart attack in 2014, Lee has been been seen as responsible for the company, despite not being able to take the official title of chairman, instead going by vice chairman.

Lee has continually denied the accusations, saying any payouts were made without his knowledge, and at no time did he expect special treatment from the government. Samsung has issued statements throughout the proceedings to the same effect, saying, “Samsung did not make contributions in order to receive favors.”

The business implications of Lee’s arrest have yet to be felt. When he was first arrested a company official quoted by Yonhap News, said it may compromise Samsung’s ability to make key decisions and investments, but the day-to-day operation of the company is unlikely to be affected. Another employee called it, “business as usual.” However, on a personal level his conviction is likely to have ended any plan to take complete control of the company.

During one of the early committee meetings, decisions were made which impacted Samsung’s business operations. The strategy office which approved and sent out the payments to the foundation was closed down, and the company will no longer take part in activities with the Federation of Korean Industries, a lobby group which acts as an intermediary between the government and businesses.

samsung new silicon valley campus

The Samsung Group will be managed by, “top executives,” Yonhap News reported after Lee’s arrest. No current statement has been made by Samsung regarding the conviction at the time of writing. However, the scandal hasn’t affected sales of the company’s mobile devices, or slowed down its output. The verdict came in the same week the firm revealed the Galaxy Note 8, a $900 smartphone to replace the ill-fated Galaxy Note 7.

Samsung Group is the largest family-owned business conglomerate in South Korea, and is the parent company to Samsung Electronics, Samsung Heavy Industries, Samsung Financial Services, and various other Samsung companies.

Update: Samsung’s Lee Jae-yong’s appeal may have revealed a meeting between the Samsung executive and president Park, which was not previously revealed.

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Porsche’s Panamera popular hybrids have battery makers struggling to keep up

Porsche has told Reuters that battery suppliers are struggling to meet the increased demand for the company’s Panamera hybrid sedan.

The Panamera hybrid combines a traditional engine with electrical propulsion, and has seen rapid growth. The company’s output of Panamera hybrids has doubled over the past 12 months. All in all, Porsche expects to produce about 8,000 of the hybrid sedans this year.

Gerd Rupp is head of the Porsche plant in Leipzig, Germany, where the Panameras are produced, and he said the company may face supply issues in the future. Porsche is keeping up with consumer demand, but there are limitations, due to the inability of battery manufacturers to make enough batteries. Rupp did acknowledge that the increased demand took Porsche off-guard as well.

“As a buyer we had originally projected different volumes (of battery systems needed),” Rupp told Reuters. “The effects can be seen in longer delivery times of currently 3-4 months for Panamera hybrid models.”

Since 2015, Porche’s parent company, Volkswagen, has been investing heavily in new automotive technologies, including self-driving cars and electric vehicles. Development of hybrid and electric vehicles in particular have become especially important as the EU is set to impose fines on auto manufacturers that do not improve their emission standards. By way of example, Audi recently announced that it might be facing one billion Euros worth of fines if it fails to meet EU’s emission standards.

Porche, one of Volkswagen’s most profitable brands, is investing about 1 billion euros in electric vehicles, including the Mission-E, its first purely electric car. The company is also considering a battery-only version of its popular Macan SUV.

Despite this increased investment, the one thing may delay the production of the Mission-E and other electric cars are the lack of skilled engineers needed to build them. Both traditional automakers and tech giants such as Google are working to create self-driving cars. In order to address the lack of skilled labor, Rupp says that Porsche has opened a new training center in Leipzig, where it will train current staff members to meet the changing demands of the auto industry.

“It’s becoming increasingly more difficult to find the right experts,” Rupp said. “We cannot completely rely on the open job market.”

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Ford stages a homecoming — and brings the future to Detroit

Ford is going home, and taking the future with it. This week, the automaker announced plans to move its self-driving and electric vehicle units to its hometown of Detroit. The business and strategy teams for both divisions of the company will be relocated to the Michigan metropolis.

A large swath of Ford employees, including those associated with electric vehicle strategy group Team Edison, will soon be housed in a 45,000 square foot former factory; fitting, given the teams’ collective missions. Indeed, Ford noted in a release, the move “brings together Ford teams that are creating new business models in a resurgent, diverse neighborhood with industrial roots.” Located in Corktown, the new Ford location is slated to begin operations early in 2018, and will allow folks working on autonomous and EV technology to test their new developments in an urban environment.

“We’re excited to choose this inspirational location in one of Detroit’s resurgent neighborhoods to accelerate our work on electric and autonomous vehicles,” said Ford president and CEO Jim Hackett. “This move and our exciting Dearborn campus transformation are important steps as we move toward our aspiration to become the world’s most trusted mobility company – designing smart vehicles for a smart world.”

Ford is casting the decision to move two of its most innovative teams as a highly strategic one. Given that both units are focused on addressing mobility challenges including congestion, pollution, accidents, and other transportation headaches, it’s crucial that they be located in an area where these challenges exist (but can be solved). More than 220 employees will be relocated to the new Corktown office.

The new location will likely be the birthplace of Ford’s first autonomous vehicle, slated to make its debut in 2021. Not only will the car drive itself, but it’ll also be of the hybrid-electric variety, which makes the decision to bring the autonomous and electric vehicle teams together all the wiser.

“Having these teams together in a dedicated facility in the heart of Detroit is truly a full-circle moment for Ford,” said Jim Farley, Ford executive vice president and president, global markets. “It’s such a conducive environment for sharing ideas, for collaboration, and for accelerating our electric vehicle efforts. We have such a great team, and we’ll be hearing more from them in the coming months.”

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Alibaba will start selling cars in China from gigantic vending machines

During the recent announcement that Ford and Alibaba were teaming up on a venture to enter China’s electric vehicle market, their statement emphasized that they planned to “explore new ways to redefine how consumers purchase and own vehicles.” Now we’ve got more details on that aspect of their strategy, with an announcement that they plan to open two fully automated vending-machine stores in January 2018 — one in Shanghai and another in Nanjing.

The entire transaction is designed to be handled online, without any human interaction whatsoever. First, when you see a car you like on the street, take a picture of it using the Taobao app. To schedule a test drive, just add your vital info and snap a selfie.

Head to the nearest Tmall Auto facility and verify your identity with facial recognition technology. Your selected car will be automatically delivered from the giant three-story dispenser and you’re off for a three-day test drive. If you like the car, you can purchase it through your phone, or return it and schedule another test with a different car.

The locations offer a wide variety of different brands, unlike when a customer goes to a traditional dealership. “Our thinking behind the Car Vending Machine is focused on helping users solve certain problems they face in the car-buying process,” Huan Lu of Tmall told the website TechinAsia. “To do that, we are building a physical, experiential store that offers staffless car pickup through facial-recognition, three-day ‘deep’ test-drives, and a one-stop-shop that displays [cars from] all mainstream brands at once.”

There’s some fine print involved — you must be a Super Member to use the service, and you have to qualify at a certain level on Alibaba’s Zhima Credit scoring system. Prospective buyers can test drive up to five cars within two months, and can only try each vehicle out once.

Car vending machines are nothing new — online auto retailer Carvana recently opened its fourth US vending machine in San Antonio, Texas, and Singapore has a 15-story luxury car vending machine filled with Porsches, Lamborghinis, and Ferraris. Alibaba has previous experience selling cars (and even airplanes) online, but this is the first time it’s created an actual marketplace to sell them from.

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Major investment firms are now offering Bitcoin futures

Bitcoin has seen rapid growth this past year, but the virtual currency’s growth has increased more than its monetary value. It has also increased the coin’s credibility as an investment. Bearing testament to this is the fact that major investment firms have begun to offer Bitcoin future exchanges, as Business Insider reported earlier this week.

The first of these firms is the Chicago-based Cboe Global Market, which launched its exchange on December 10. One of the company’s main rivals, CME Group, is preparing to offer its own future exchanges on the 18th. Nasdaq is also getting ready to launch an exchange, but it won’t be ready until the second half of 2018.

Reuters has reported that TD Ameritrade is now getting on the Bitcoin action as well, and will allow its clients to take part in Bitcoin futures on December 18. The trades will be conducted using the Cboe Futures Exchange.

Futures are basically a form of gambling where two or more parties place a bet on the price of the certain item at some point in the future. The concept has been around for more than a 100 years, and is normally handled by professional firms and investors. The winner of the “bet” is then paid either in cash or in the form of the item that is being speculated upon. In the case of Cboe Global Market’s Bitcoin futures, the winner is paid in cash rather than Bitcoins.

Those who are interested in getting involved in the Bitcoin futures market should know that, due to the instability of the Bitcoin marketplace, the group is requiring all investors to have at least 44 percent of the settlement price set aside for the bet. This practice is fairly common in future exchanges, but the percentage normally hovers around 10 percent.

Instability is certainly one of the biggest fears that investors have regarding Bitcoin. Many believe that the market isn’t mature enough to support futures exchanges, and the price of Bitcoin has experienced some rather rapid fluctuations in recent months. Currently, the coin is valued at over $$19,265.26, but it should be noted that it went as high as $19,000 before falling back down to the $15,000 range in the recent past.

While the risks are blatantly apparent, there are many who excited by the prospect of major investment firms getting involved in Bitcoin, as it might open new doors for other cryptocurrencies.

Update: TD Ameritrade will also offer support for Bitcoin futures.

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