Chaebol boss and son get prison terms for fraudA Seoul court yesterday sentenced the chairman of LIG Group, Koo Cha-won, 78, to three years in prison. His eldest son, Koo Bon-sang, 43, vice chairman of the defense systems manufacturer LIG Nex1, drew a term of eight years. Both had been convicted of fraudulently issuing commercial paper in the amount of more than 200 billion won ($184 million).
Koo and his two sons have been embroiled in allegations of fraud with the issuance of the short-term debt in an effort to breathe life into LIG Engineering and Construction, a construction subsidiary, that was about to fail. But in the same ruling, the court acquitted Koo’s second son, 41-year-old Koo Bon-yeop, formerly the vice chairman of LIG E&C.
Two of the chairman’s senior aides - Oh Chun-seok, 53, the president and CEO of LIG Corporation and Jeong Jong-oh, 58, the former chief management official at LIG E&C - were also arrested with the Koos last October for their alleged involvement in the issuance of the paper. Both were sentenced to four years in prison by the court.
The group, prosecutors told the court, issued the debt between October 2010 and March 2011 while misstating the financial condition of the subsidiary. On March 21, 2011, just after the last of the commercial paper was issued, LIG E&C filed for court receivership, weighted down by the recession in the local construction industry and unable to repay many of its project financing loans.
The court ruled that Chairman Koo and his oldest son had committed “a serious corporate crime,” and said their actions “resulted in great losses to shareholders, creditors and investors, lowering the credibility of enterprises and breaking down the order of the free market economy.”
“In this case, 800 victims incurred a loss of 343.7 billion won,” the court said in its ruling, “and the plaintiffs strongly desired punishment.”
The court defended its imposition of a prison term on the chairman, saying its reasoning about the extent of the damage he caused justified imprisonment. “There is a need for a prison sentence although he, at the age of 78, is elderly and suffers from poor health,” the court said.
Koo Bon-sang, the older son, played “a decisive role” in the criminal acts in this case, the court continued, saying that “as the heir of the LIG Group, he had the largest financial benefit.”
The younger son was vice chairman of LIG E&C at the time of the fraud, but he did not receive reports on its financial accounts nor did he authorize any transactions, the court said. He did not participate in any of the LIG Group meetings where the scheme was planned, nor did he hold much authority within the very top leadership involving family members.
LIG Group was founded in January 2006 and took over Hanbo Construction and Engineering in June 2009. It filed for court receivership after running up 1 trillion won in losses from failed construction projects and unsold buildings.
BY SARAH KIM, PARK MIN-JE [firstname.lastname@example.org]