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2 Chaebol justice in
South Korea By Donald
Kirk
The sighs of relief reverberating
around the glistening twin towers of the Hyundai
Automotive empire on the southern reaches of Seoul
were audible in boardrooms all over South Korea.
Once again, the titan of one of the great
chaebol (conglomerates) had gotten off with
a suspended sentence and probation.
This
time, the beneficiary of the mercy from the South
Korean judicial system was the country's
second-richest man, Chung
Mong-koo, whose father,
Hyundai founder Chung Ju-yung, made certain "MK"
got control of Hyundai Automotive when he divvied
his holdings among his six surviving sons before
his death in 2001.
The presiding judge of
the Seoul High Court, Lee Jae-hong, overruled a
lower court when he rescinded jail time for MK,
suspending a three-year sentence in the interests,
as usual, of an economic system more firmly
entrenched now than at any time since the economic
crisis nearly a decade ago.
Indeed, said
Lee, the court had "mulled over the arguments" but
"could not help worry about the economic danger
the country might face if the accused is put into
jail".
Hyundai Automotive executives,
fearful about the impact on image and morale if
their hard-nosed top boss actually went to prison
on charges of influence-peddling and bribery, were
ecstatic but respectful. "Our sense of
responsibility for the national economy, and
social as well as business practices, have been
enhanced" by the ruling, said a spokesman.
Echoing the sentiment, the Federation of
Korean Industries, a kind of club of
chaebol chieftains, saw the ruling as
"greatly helpful to the global management" of
Hyundai Automotive as well as "development of the
national economy".
The gadfly People's
Solidarity for Participatory Democracy might call
the decision a "violation" of the court's
commitment to fight white-collar crime, but such
querulous complaints seemed meaningless as Chung,
impassively tough, walked out of the court behind
a phalanx of executives.
In fact, Hyundai
executives had believed all along that the High
Court judge would spare their 69-year-old
super-boss, freed on bail of more than US$1
million in February while appealing the jail
sentence imposed by a lower court. The same court,
after all, had suspended a 30-month sentence
imposed on Hyundai Automotive vice chairman Kim
Dong-won and lesser sentences against two other
executives.
The denouement of the Chung
case was to be expected in a system in which
chaebol leaders are regularly getting in
and out of trouble, sometimes spending time in
jail, only to re-emerge stronger than ever. Chung
Mong-koo's motivation, moreover, was one that
Koreans can appreciate - a case that again proves
the power of heredity, nowhere more so than over
the chaebol that dominate the economy.
He wanted to place his only son, Chung
Eui-son, 34, president of Kia, in a position to
gain undisputed control over the group. That goal
was one reason for share manipulation, say
prosecutors, in which the elder Chung dipped into
a corporate slush fund to the tune of more than
$100 million, setting up a satellite company as
the logistics arm of the group, watching its
profits soar and then floating the shares at
fantastic prices.
Thus Eui-son, already
president of Kia Motors, the subsidiary taken over
by Hyundai Motors in 1998 at the height of the
Asian economic crisis and waiting to take over the
group from his father, could ensure control over
Hyundai Automotive's main companies, Hyundai
Motors and Kia Motor.
Thus Chung's battle
on behalf of his son's inheritance might be
forgiven as a parental sacrifice in a Confucian
society. He had already gone through the annoyance
of having to spend 62 days behind bars while
awaiting trial after prosecutors argued against
freeing him for fear he could then rig the
evidence.
Nonetheless, the scandal at
Hyundai Automotive dramatized "the corporate
issues as well as the chaebol style", said
Tariq Hussein, longtime corporate consultant in
Seoul and author of a well-received study,
Diamond Dilemma: Shaping Korea for the 21st
Century. "Korea still has a poor track record
of corporate governance. Only significant
improvements across the board will change
anything."
No one is predicting another
crisis on the magnitude of the one 10 years ago
that forced the government to go to the
International Monetary Fund for a $58 billion
bailout, but analysts worry about the implications
for corporate governance of a system ruled by the
chaebol a decade after a regional economic
crisis nearly bankrupted the national economy.
"There's no doubt this trial has been a big
distraction," a Hyundai source told Asia Times
Online.
A corporate official said Hyundai
Automotive, including Hyundai Motor and Kia
Motors, the latter acquired at auction during the
economic crisis, had paid a price for the damage
to its image - as
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