A local court on Monday sentenced Chung Mong-koo, chairman of Hyundai Motor Group, the world's sixth-largest automaker, to three years in jail for breach of trust and embezzling company funds.
The court, however, allowed him to remain on bail while his lawyers appeal, citing the need to ensure his right to defend himself in future trials and to minimize the ruling's influence on the national economy.
Chung, 68, was arrested in April last year on charges that the conglomerate raised a huge slush fund through its affiliates to bribe politicians and government officials. After spending two months in jail, Chung was released on bail of 1 billion won (US$1 million) in June.
He was charged with embezzling 90 billion won in company funds and causing more than 210 billion won in losses to key affiliates of the automaker by forcing them to financially support less stable affiliates.
"The accused used his status as chairman of Hyundai Motor Group to secretly set aside a huge amount of slush funds in a short period of time and use the money for his own purposes," judge Kim Dong-o of the Seoul Central District Court said. "This behavior hurts the soundness of corporate management and self-regulation.
Wrong customs must be eradicated to make the South Korean economy an advanced one." The judge also said Chung's actions were clear-cut criminal behavior.
Prosecutors had demanded that he spend six years in prison, calling his crimes "grave." Chung's lawyers pleaded for leniency, saying his return to jail would deal a further blow to the automaker, which is already suffering from serious management problems, and the national economy as a whole.
After the ruling was given, Chung walked out of the courtroom without making any comments.
A senior executive at Hyundai Motor, who declined to be named, said he was "shocked" and worried about a possible management crisis.
Chae Dong-wook, a senior prosecutor in charge of the case at the Supreme Prosecutors' Office, said the length of the jail term is considered proper.
"We will decide later on whether or not to appeal," he told reporters.
While the ruling is unlikely to have any immediate impact on Chung's control of Hyundai Motor, it crushed some market expectations that the court would give Chung a suspended jail term, given the judicial track record of lenience toward business leaders.
Shares of Hyundai Motor fell by as much as 3 percent following the ruling amid concerns about the automaker's future.
Chung's two-month absence from management delayed the construction of factories by Hyundai Motor and Kia Motors Corp., its affiliate, in Europe and the United States, Hyundai officials said. Hyundai is now plagued by labor troubles, sluggish sales and intensifying price competition with Japanese rivals, partially due to weakness of the U.S. dollar against the South Korean currency.
The court also handed down suspended jail terms to three other Hyundai executives who were indicted together with their boss for their involvement in the creation of the slush funds.
Kim Dong-jin, the vice chairman of Hyundai Motor Group, was sentenced to two years and six months in jail, suspended for four years, while the carmaker's two vice presidents, Lee Jung-dae and Kim Seung-nyun, received jail terms of two years and six months, respectively, suspended for three years.
Hyundai Motor Group, which controls about 70 percent of the domestic auto market, is South Korea's second-largest conglomerate and the sixth-largest automaker in the world.
Seoul, Feb. 5 (Yonhap News)
Hyundai Motor chairman sentenced to three years in jail |
