Prosecutors said yesterday they had arrested two Hyundai Motor executives and a former bank official in a widening graft probe of South Korea's No.1 automaker.
Lee Jung-dae, vice president in charge of finance and accounting, and Kim Seung-nyun, chief of the firm's procurement division, were detained late on Thursday, said senior prosecutor Chae Dong-wook.
"We arrested Kim and vice president Lee ... after we obtained concrete evidence showing they were involved in the creation of Hyundai's slush fund," Chae told a press conference.
Park Sang-bae, a former vice president of the state-run Korea Development Bank, was arrested yesterday over his role in the bank's controversial decision in 2002 to reschedule the debt of ailing Hyundai Motor units.
Park became the eighth person to be arrested since the probe began last month following the arrest of a well-connected business lobbyist charged with bribing politicians and government officials.
Chae said the three were being held on a 48-hour warrant, after which they would be either freed or face indictment.
After allegations emerged that millions of dollars in cash paid out by the lobbyist came from Hyundai, prosecutors last month raided Hyundai Motor offices and the premises of several affiliates, taking away truckloads of company records.
The arrest last month of lobbyist Kim Jae-rok, a business consultant who served in 1997 as an aide to then-president Kim Dae-jung, led prosecution authorities to Hyundai Motor, the nation's second largest business group with some 40 affiliates.
Prosecutors have questioned Hyundai officials to see whether lobbyist Kim used Hyundai's money for his activities.
Last month they arrested Lee Ju-eun, the president of Glovis, a Hyundai affiliate that ships the company's cars worldwide, on charges of paying millions of dollars to the lobbyist to solicit business favors for Hyundai Motor, the world's seventh ranked automaker.
Prosecutors are investigating how much Hyundai Motor head Chung Mong-koo knew about the alleged illicit activities. Chung is also under fire for allegedly seeking to transfer his business empire through illegal means to his son Chung Eui-sun, the head of Hyundai affiliate Kia Motors.
Both men are expected to be called by prosecutors to testify after the senior Chung returns next week from a business trip to China.
A public accountant was arrested on Thursday for lobbying government officials to help Hyundai units Wia Corp and Ajou Metals reschedule their debt to the government in 2001.
"This is the first case in which public funds, raised at that time to rescue ailing firms, have been misused. Many people are believed to be involved in the waste of public funds by writing off the debt of Hyundai units," Chae said.
Emerging from the painful economic meltdown of 1997-1998, South Korea bailed out many debt-stricken banks and corporations.
Conglomerates have been accused of using financial units to acquire easy credit for expansion, thereby contributing to many of the country's difficulties during the financial crisis.
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