Hyundai case widens with official’s arrest
Logistic arm’s CEO to be charged with embezzlement, authorities say
An investigation that began because of suspicions about illegal lobbying is fast developing into a tumult about large amounts of money cached for political purposes by the Hyundai Automotive Group, the country’s second largest conglomerate. It also could involve key political and economic figures.
Prosecutors say they have found circumstantial evidence suggesting that the Hyundai Automotive Group amassed the slush fund through its affiliates Glovis Co. and Hyundai Autonet, and gave Kim Jae-rok the job of spreading the cash around, both to advance Hyundai’s business interests and to solidify the control of the Chung family, the group’s owners.
Mr. Kim, prosecutors said, is suspected of using the funds for bribery. Once the head of a consulting group, Investus Global, he was prominent in arranging some of the bailouts and restructuring that resulted from the 1997-98 financial crisis. Although the investigators said he was the primary target of their work right now, eyebrows were raised over the extraordinary Sunday raid on Hyundai. Prosecutors would not confirm it, but speculation is growing that Mr. Kim is being viewed as a conduit for bigger problems at the group.
Prosecutors kept up the fast pace of their investigation yesterday, making a warantless arrest of Lee Ju-eun, the chief executive officer of Glovis Co., a logistics affiliate of the automotive group. Mr. Lee is also the chief manager of the finances of Chung Mong-koo, the Hyundai Motor Co. chairman.
Prosecutors said they had questioned Mr. Lee about the corporate funds, in particular why several billion won (several million dollars) was passed to Kim Jae-rok.
The prosecution has applied for a warrant to continue to detain Mr. Lee, telling a court that it intends to charge him with embezzling corporate funds.
Prosecutors also said another affiliate, Hyundai Autonet, was involved in amassing the secret fund.
Chae Dong-wook, the lead prosecutor in the matter, said yesterday, “Only after we confirm the total size of the slush fund, which we suspect will reach several tens of billions of won, we can trace the funds handed over to the lobbyist Mr. Kim and find out whom he lobbied.” Mr. Chae added, “It is our principle to investigate the targets of Mr. Kim’s influence peddling in the political, bureaucratic and financial sectors.”
Korea has no lobbying industry per se, and Koreans tend to use the word “lobby” to mean bribery. The prosecution also slapped foreign travel bans on at least 10 director-level managers at the group. The junior Mr. Chung is the biggest shareholder of Glovis Co., holding about 32 percent. His father owns another 28 percent.
Founded in 2001, Glovis Co. grew quickly with support from the Hyundai Automotive Group. It is the group’s sole source for logistics services, and its revenues ballooned to 1.5 trillion won after only four years in business. Mr. Chae, the lead prosecutor, said it was too early to ask if his team planned to widen its investigation to the two men.
Prosecutors said their raid at Hyundai on Sunday garnered 80 boxes of documents. More than 100 prosecution staff members were at the group’s headquarters for about 15 hours, concentrating their search on the group’s planning office.
by Kim Jong-moon, Chun Su-jin