Prosecutors seek arrest of Hyundai Motor chief in graft probe
South Korean prosecutors called for the arrest of the head of the Hyundai Motor group on charges of embezzling more than 100 million dollars from the country's top automaker.
Hyundai Motor chairman Chung Mong-Koo, 68, used the money to set up a slush fund to bribe government officials and bankers, prosecutors said.
They said they were still investigating where the money went, adding that the scam cost South Korea's second largest business group some 300 billion won (318 million dollars) in shareholder value.
"It (is) necessary to sternly punish, in accordance with the law and principles, the one who is mainly responsible for causing huge losses to the company," prosecutor Chae Dong-Wook told a media briefing on Thursday.
A Seoul court will convene Friday to consider the arrest warrant request.
Chung's son, Chung Eui-Sun, 35, president of Hyundai Motor affiliate Kia Motors, will also be charged but an arrest warrant has not been sought for him, Chae said.
Prosecutors allege that the Chungs used the multi-million dollar slush to bribe officials and businessmen to win favours, including construction permits and debt write-offs as well as to ease a father-to-son transfer of control.
The scandal forced the company to delay indefinitely the announcement of its first quarter results scheduled for Thursday and to cancel meetings with potential investors.
Kia Motors earlier postponed a groundbreaking ceremony for a 1.2 billion dollar new US plant in West Point, Georgia while Hyundai Motor has put off a similar event in the Czech Republic.
As the scandal deepened, South Korea's leading newspaper, the Chosun Ilbo, warned that prosecutors should consider the economic impact.
They "cannot lose sight of the status and importance of Hyundai Motor for our economy," it said, noting that the car industry overall accounts for 10 percent of Gross Domestic Product (GDP) and 11 percent of South Korean jobs.
Prosecutors rejected pressure to go easy on Hyundai Motor because of its importance to the national economy, with Chae saying that the investigation would be conducted according to "principle and law."
He conceded, however, that prosecutors had decided not to seek an arrest warrant for the junior Chung to minimize the impact on Hyundai management.
"But at the same time, we also have to consider the fact that it is the absolute call of the times that South Korea must secure the transparency and credibility of its firms to become an advanced country," he said.
The South Korean government has been on a crusade to stamp out widespread corporate wrongdoing under President Roh Moo-Hyun, elected on an anti-corruption platform in 2002.
The country's leading employers association, the Federation of Korean Industries, said it regretted the decision to seek Chung's arrest.
"We are concerned whether the arrest will hinder the group's global business," it said in a statement.
The Korea Chamber of Commerce and Industry meanwhile said the arrest of Chung would damage the firm's image overseas.
Last week, Hyundai Motor issued a public apology and the Chungs promised to donate to charity their 60-percent holding worth some one billion dollars in Glovis, a Hyundai unit at the center of the scandal.
The senior Chung was sentenced to a six months suspended jail term 28 years ago for violating construction laws but was cleared of graft charges.
Together with Kia Motors, which it took over in 1998, the Hyundai Motor group is now ranked seventh in the world in vehicle sales. It controls more than 70 percent of the domestic market with total sales amounting to 43 trillion won (45 billion dollars) last year.
With its 40-odd subsidiaries, the Hyundai Motor group is the country's second largest conglomerate after the Samsung Group, with 2005 total sales hitting 85 trillion won.
Analysts say chairman Chung's hard-driving leadership style is behind the company's success.
"Chung Mong-Koo is credited with boldness in decision-making and strong leadership in this expansion drive," said Lim Chae-Gu, an auto industry analyst with Kyobo Securities.
But analysts also link the latest allegations surrounding the alleged group slush fund to his management style in which the chairman alone makes all important decisions.
AFP
