An extensive and embarrassing investigation of the most iconic industrialist in South Korea has ended with an indictment on tax evasion charges for Lee Kun-hee, the chairman of Samsung.

But, in what prosecutors said was an effort to spare the fragile South Korean economy from “enormous disruption”, the 66-year old corporate leader will not be arrested. The three-month investigation, which was triggered by an internal whistle-blower, has shaken the Seoul corporate world to its core.

The country's giant family-run chaebol conglomerates have had their share of scandal, but Samsung had appeared bullet-proof: the intensely private Mr Lee has seemed particularly Olympian.

To Koreans, Samsung's 20 per cent contribution to the country's exports and triumphs over Japanese and US competitors have sealed its status as the world's greatest company, so to see its leader under fire has been alarming.

But the probe's findings - though bad news for Mr Lee, who technically risks a long prison sentence if convicted - were not quite the dynamite many had predicted. The charges of tax evasion and breach of trust are damaging, but crucially, prosecutors found no evidence that the company maintained a giant slush fund for bribing politicians, senior bureaucrats and judges.

Although Mr Lee could receive a sentence of between five years to life for evading 112.8 billion won (£55 million) of taxes, the court has the flexibility to impose no time behind bars. Other convicted chaebol chieftains in South Korea have usually been handed suspended sentences.

Many believed that the Samsung investigation would prompt the partial break-up of the company. After the latest round of questioning last week, Mr Lee hinted that it might eventually be restructured and he might step down.

Even yesterday, as Mr Lee's alleged tax evasion came to light, the deference paid to Samsung was clear. The prosecutors said that the 66-year-old chairman would not be arrested for fear of “enormous disruptions” to the Samsung management. “The negative repercussions on our economy would be very big amid the extremely competitive global economic situation.”

Mr Lee was also investigated for his role in handing over the reins of power at Samsung to his son. Shareholder groups and other activists have alleged for years that Mr Lee has manipulated stock to ensure a smooth inheritance of the family power base within Samsung and its 50-odd subsidiary divisions. The investigation supported the allegations.

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