Tue, Feb 06, 2007 - Page 1 News List

Hyundai boss handed three-year jail term

AP , SEOUL

Hyundai Motor Co chairman Chung Mong-koo was convicted yesterday of embezzlement and other charges and sentenced to three years in prison over a slush fund scandal that has weighed on the world's sixth-largest automaker.

Prosecutors, who have been taking a hard line on corruption in South Korea, last month sought a six-year jail term, calling Chung's alleged crimes "grave."

But Judge Kim Dong-oh said the lesser sentence was justified because of Chung's "big contributions to the development of the country's economy" and noted his involvement in charity to atone for his actions.

Still, Kim said that Chung's actions were "clearly criminal acts" that "greatly undermined the transparency and soundness of business management and had many adverse effects on our business culture."

Chung planned to appeal the verdict.

"We are greatly disappointed by the court's ruling and it is chairman Chung's intention to file an appeal," Hyundai Motor said in a statement.

Chung "retains full operational control and decision-making authority," it said, adding that Hyundai Motor said its domestic and overseas operations "will continue to function as normal."

The 68-year-old Chung will remain free for the time being and doesn't face immediate detention. He missed more than two months of work after being jailed following his April arrest and entering a hospital for a health exam. He was granted bail in June and returned to work in July.

The company appeared to flounder in his absence. Key decisions about overseas plant construction involving both Hyundai Motor and its affiliate Kia Motors Corp were delayed. Labor problems involving Hyundai's strike-prone labor union were also left to fester.

Chung had apologized for his actions and his lawyers argued he be given a suspended sentence -- meaning he would not actually serve prison time unless involved in other crimes.

Three other Hyundai officials facing similar charges were also convicted but all were given suspended sentences.

It is questionable whether Chung will actually serve the prison term as appeal courts have often granted more lenient sentences than the lower court rulings in cases which involve business tycoons.

In 2005, Chey Tae-won, CEO and chairman of South Korea's leading oil refiner, SK Corp, had the three-year prison term he received for accounting irregularities suspended by the Seoul High Court.

Chung appeared tight-lipped and grim as the verdict was read and walked silently from the courtroom after the hearing ended. Hyundai officials who packed into the room for the hearing also were silent.

Prosecutors said Chung illegally raised a 103.4 billion won (US$110.4 million) slush fund from affiliates from which authorities say he spent 69.6 billion won for private and other purposes, including payments to lobbyists for government favors.

He was also convicted for inflicting financial damage on affiliates through questionable deals and arrangements that allegedly protected or boosted the financial interests of him and his son, Eui-sun, who heads Kia Motors, the country's second-largest carmaker. The younger Chung did not face trial.

The senior Chung had pleaded for leniency, apologizing at an earlier hearing for "causing trouble over this case" and pledging to make Hyundai the world's No. 5 automaker if given the chance.

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