Hyundai Motor head arrested over slush fund scandal
Hyundai Motor Group head Chung Mong-Koo has been arrested and thrown into a prison on charges of embezzlement and breach of trust following a month-old probe into a slush fund scandal.
Wearing a sky blue tie and dark business suit, a grim-looking Chung, flanked by two investigators, was led down the steps of the Prosecutor General's Office and shoved into a waiting car to drive to Seoul Prison.
Earlier on Friday, a Seoul court issued an arrest warrant for Chung as requested by the prosecution.
"The court grants the arrest warrant requested by prosecutors for Chung Mong-Koo," Senior Judge Lee Jong-Seok of the Seoul district court said in a court statment.
"The accused keeps denying the charges and therefore, there is the possibility of the accused trying to go into hiding or destroying evidence," he said of the reasons why he decided to issue the warrant.
Chung is charged with raising about 130 billion won (138 million dollars) of slush funds through the group's affiliates since 2001.
The 68-year-old chairman was also charged with causing 390 billion won (414 million dollars) in damages to the country's second largest business group through his business misconduct.
"If convicted, he is expected to face a jail sentence as the amount of embezzled money and the size of damages is huge," the court judge said.
Chung is not a stranger to legal problems. He was sentenced to a six-month suspended jail term 28 years ago for violating construction laws but was cleared of graft charges.
With Chung under lock and key, prosecutors will continue questioning him to find out where he spent money from the slush fund.
"Investigation will continue to find out where the money went," Senior Prosecutor Chae Dong-Wook told journalists.
Prosecutors are investigating allegations that a substantial portion of the slush fund was used to bribe government and financial officials in return for business favors.
He is also suspected of using part of the slush money to facilitate the transfer of corporate wealth and management control to his only son, Chung Eui-Sun, president of Kia Motors.
Prosecutors plan to indict the son but without detention for his alleged involvement in raising and operating the slush fund.
According to prosecutors, chairman Chung caused some 390 billion won of losses to the group by compelling group subsidiaries such as Hyundai Motor and Hyundai Heavy Industries to inject new funds into an insolvent aviation unit of the group in late 1990s.
Through this method, Chung was able to free himself from debt obligations that stemmed from debt guarantees worth 170 billion won he pledged for the aviation unit. This weak subsidiary was later merged with a different company.
During a court hearing held before the issuance of the arrest warrant, the prosecution said that a 48-billion-won slush fund was created in 2002 and 20 billion won of it was used between August and December of that year, just before the presidential election, suggesting the money might have been used as illegal political donations.
Prosecutors also allegedly secured testimonies that millions of dollars of the slush fund was used to placate the labor union not to stage strikes.
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.
AFP
