A Seoul court on Thursday sentenced Woongjin Group chairman Yoon Seok-keum to a four-year jail term for inflicting losses among investors and entire business units by masterminding irregular funding for the group’s financially distressed units. The prosecution had asked for six years in prison.
Yoon had been indicted on charges of raising funds by issuing commercial paper worth 100 billion won ($97 million) from July to August 2012 while concealing some of Woongjin subsidiaries’ insolvent financial status.
The Seoul Central District Court clarified that the “unfair funding to affiliates is a practice that causes damages for investors,” adding that the overall group was also harmed by his irregular funding and embezzlement of company funds.
Though the court said Yoon had engaged in irregular funding by exploiting his position as the chief, it dismissed the allegations that he “issued fraudulent CP in an attempt to intentionally undermine investors.”
Further, the court chose not to put the 68-year-old business tycoon under court custody.
The verdict may be linked to the prosecution’s appeal, as prosecutors as well as financial regulars earlier had continued to claim that Yoon and several group executives were implicated in the irregular CP issuance by duping investors.
In March 2009, Yoon and the executives withdrew 1.25 billion won of corporate funds from Rexfield Country Club, a sister firm of Woongjin Group, on the presumption of using it as consulting fees to buy real estate, but gave it to founding members of the group as severance payments.
The prosecution had stressed that the executives also committed a breach of trust by directing other units to provide 96.8 billion won in illicit financial support to Woongjin Capital, owned by chairman Yoon.
In late 2012, Woongjin Group and its creditors reached an agreement to push for the sale of Woongjin Chemical as a way to improve financial soundness.
The conglomerate, however, had already been receiving public criticism for a breach of ethics after the group’s holding company and the construction unit filed for court protection.
A day before their applications for court receivership, Woongjin Holdings was found to have paid back 53 billion won of debt it borrowed from Woongjin subsidiaries. The company repaid 25 billion won and 28 billion won, respectively, to Woongjin Thinkbig and Woongjin Energy two days before the due date, in an apparent move to prevent damage to its business units as the repayment would be impossible under court control.
Meanwhile, Yoon had apologized for his mismanagement of the companies and resigned as CEO of Woongjin Holdings.
By Kim Yon-se (firstname.lastname@example.org)