Hyundai chief gets 3-year sentence

Chung Mong-koo, chairman of Hyundai Automotive Group, was yesterday sentenced to three years in prison for embezzling company funds and creating slush funds.

The Seoul Central District Court, however, allowed the tycoon to remain free on bail in order to minimize any negative impact on the economy and to "fully secure his right to defend himself."

Chung, 68, was found guilty of all charges against him, including the embezzlement of over 90 billion won ($96 million) of company funds, raising about 69.3 billion won in secret funds, and causing over 210 billion won worth of damage to Hyundai companies and affiliates through breach of trust.

He was arrested last April, but was released on bail in June after requesting leniency, citing his poor health and a leadership vacuum at the conglomerate.

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"The accused had privately used the money after secretly creating a huge sum in slush funds over a short period of time, utilizing his position as Hyundai Motor`s chairman. His behavior hurt the soundness of corporate management and self-regulation," Judge Kim Dong-oh told the packed court. "Those illegal customs must be eliminated to allow the Korean economy to advance."

Kim said Chung`s actions represented "clear-cut criminal behavior," but the court has decided to impose a lesser sentence than prosecutors` request of a six-year prison term, citing "his big contributions to the development of the country`s economy" and the company`s involvement in social charities.

Chung, wearing a dark-gray suit, refused to comment to the media as he walked out of the courtroom, but Hyundai Motor said he will appeal the case.

"Obviously we are greatly disappointed by the court`s ruling and it is Chairman Chung`s intention to file an appeal," said Oles Gadacz, a spokesman for Hyundai.

The company said Chung will maintain his "full operational control and decision-making authority," and that its domestic and overseas operations "will continue to function as normal."

The verdict, however, went against market expectations of a probationary sentence for Chung, who runs the company that controls about 70 percent of the domestic auto market.

Hyundai shares fell as much as 3.15 percent following the sentencing but recovered to close flat at 69,800 won.

Chung had apologized for "causing such trouble" and pleaded for a second chance to make his conglomerate the world`s No. 5 automaker.

Three other top Hyundai executives, including vice president Kim Dong-jin, financial chief officer Lee Jung-dae, and secretary chief Kim Seung-nyun, also received two and a half year jail terms after facing similar charges.

The courtroom, packed with Hyundai officials, was silent after the verdict was delivered by the judge.

The court, however, acquitted Kim Dong-jin of paying 300 million won in bribes to Chung Dae-kun, chairman of National Agricultural Cooperative Federation, also known as Nong Hyup, in exchange of arranging a fire-sale price for the conglomerate to purchase its 21-story building in Yangjae-dong of Seoul.

(aibang@heraldm.com)



By Annie I. Bang