Appeals rulings let chaebol chairmen out of jail

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Appeals rulings let chaebol chairmen out of jail

A Seoul appellate court yesterday convicted two owners of Korea’s largest conglomerates on charges of fraud and embezzlement but let them free by suspending their three-year prison terms for five years.

In a closely watched case, the Seoul High Court yesterday handed down a three-year prison term, suspended for five years, to Kim Seung-youn, chairman of Hanwha Group, the nation’s 10th-largest chaebol. Kim was ordered to pay 5 billion won ($4.6 million) as a fine and carry out 300 hours of community service.

Kim was released from jail in January 2013 because of poor health, but his suspension was due to end Feb. 28. He is now free.

“Kim’s case differs from other cases [related to conglomerate owners] in that he did not commit the crimes to cover up his personal faults,” said presiding judge Kim Ki-jung before a packed court. The judge said Kim used “assets held by Hanwha’s affiliates [in an illegal way] to solve overarching financial and credit problems plaguing the group.”

Kim, 62, was convicted of using about 320 billion won of Hanwha’s money to pay back the debts of companies he ran under fake names from 2004-6 and inflicting losses on the group by selling stakes to his family at artificially low prices.

Last September, the Supreme Court reversed the high court ruling, saying that some of the breach of trust charges had not been proven. It ordered a retrial in the high court.

“We have come up with the ruling today in consideration that Kim deposited 159.7 billion won in a court account in an effort to pay back the losses,” said the judge, adding that Kim’s poor health was also taken in account. Kim, who was wheeled into the court on a hospital bed while wearing a face mask and a hospital robe, did not show any response as the verdict was read.

On the breach of trust charges contested by the Supreme Court, the court yesterday ruled that Kim only caused 1.1 billion won worth of losses to Hanwha in one particular business malfeasance case related to a deal involving Dream Pharma, a Hanwha affiliate. It rejected the prosecution’s claim that Kim caused the company 15.7 billion won in losses from the case.

“We respect the court’s ruling,” said the company in an official statement. “We will strive to overcome many business challenges that have emerged during the course of the trials as well as reflect on our own misdeeds. We will work hard to contribute to the national economy.”

Kim, known for his dynamic leadership of the group, was sentenced in August 2012 by the Seoul Western District Court to four years in prison and was ordered to pay a 5.1 billion won fine for embezzlement and breach of trust.

The sentence was reduced in an appeals trial in April to three years in prison and a fine of 5.1 billion won.

In a separate sentencing hearing, the Koo family of LIG group received judgements and Chairman Koo Cha-won received a three-year-prison term, suspended for five years.

“Though it is true that Koo committed a serious crime as the owner of the group, we took into consideration his age and poor health,” said the same judge, Kim Ki-jung.

Last September, Koo was convicted for fraudulently issuing commercial paper of more than 200 billion won in an effort to save LIG Engineering and Construction, a construction subsidiary that was about to fail. The 79-year-old chairman was sentenced to three years in prison and was sent straight to jail from the court room.

But yesterday, Koo’s second son, Bon-yeop, lost his appeal and was sent straight to jail after being sentenced to three years in prison by the court on similar charges, overturning an acquittal by a lower court.

“As Bon-yeop held the title [of] vice president of LIG Engineering and Construction and is the second son of Cha-won, it only made sense that he was involved in a variety of business malpractices committed by the company, including account fraud and the issuing of fraudulent commercial paper,” said the court.

The appeal of Koo’s first son, Bon-sang, vice chairman of LIG Nex 1, was more successful. An earlier jail sentence of eight years was reduced to four years.

People are paying particular attention to the Hanwha and LIG cases to see if the courts will continue their tough stance against business chiefs breaking the law, which began last year. Before that, Korean courts tended to be lenient to corporate chiefs found guilty of embezzlement or other wrongdoings, especially among families that control business groups, in recognition of their contributions to the national economy.

Yesterday’s rulings sparked speculation that the courts have softened their tougher attitude to business owners. But the Seoul Central District Court yesterday convicted Chang Jae-ku, chairman of the daily Hankook Ilbo, of embezzlement and breach of trust, and sentenced him to three years in prison.

“As an owner of a journalistic institution, Chang should have abided by higher legal and ethical standards,” said the court.

Despite his heavy responsibility of leading one of the country’s most admired journalism institutions, the court said, the 67-year-old chairman failed to manage the company in a transparent way and committed breach of trust and embezzlement, causing the newspaper company 33.8 billion won in losses.

“No matter what his intentions were,” it said, “the nature of his crimes are grave.”

BY KANG JIN-KYU [jkkang2@joongang.co.kr]

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