Seoul Judge Surprises Tycoon With Prison Term

The New York Times, August 16, 2012

SEOUL — A Seoul court on Thursday sentenced the head of the South Korean conglomerate Hanwha to four years in prison for embezzlement and made a rare decision to have the businessman dispatched directly to prison from the courtroom.

The Hanwha chairman, Kim Seung-youn, 60, was convicted of embezzling almost 300 billion won, or $264 million, and was ordered to pay a fine of 5.1 billion won.

For years, South Korean courts have been perceived as lenient toward businessmen who face corruption charges. Since 1990, the heads of seven of the country's top 10 family-controlled conglomerates, including the Samsung Electronics chairman Lee Kun-hee and the Hyundai Automotive chairman Chung Mong-koo, have been sentenced to a combined 22.5 years in prison for crimes including bribery, embezzlement and tax evasion.

None of the seven spent more then a few months behind bars. Their sentences were suspended by judges, according to Chaebul, a Web site that monitors the country's conglomerates, and all seven returned to management positions after receiving presidential pardons.

South Korea is a country in which the public's despair over the treatment of the superrich by the judiciary system is captured by the saying "With money, not guilty; without money, guilty."

As the country gears up for a presidential election in December, calls for tougher punishment of corruption have become increasingly loud, and the presidential hopefuls have all vowed to rein in the influence of South Korean conglomerates, known as chaebol.

The corporate behemoths have been credited with leading the rapid economic growth of South Korea, the fourth-biggest economy in Asia after those of China, Japan and India. But they have also faced repeated suspicions of bribery, poor corporate governance and shady business deals, often to help the families of board members accumulate wealth.

The country, which has seen income disparity widen, has also reacted negatively as the conglomerates absorb businesses including bakeries and retail outlets that had traditionally been the province of small business owners. Hanwha has subsidiaries in a range of sectors including construction, insurance, chemicals and explosives.

"As long as we don't end this wrong practice of pardoning the chaebol heads, it will be as difficult for us to eradicate irregularities and injustice in our society as it is for a camel to pass through the eye of a needle," Lee Hye-hoon, a leader of the governing Saenuri Party, said Thursday before the court ruled on Mr. Kim's case.

At least two other leaders of major conglomerates — Chey Tae-won, chief of SK Group; and Park Chan-koo, head of Kumho Petrochemical — face court cases. Mr. Chey, who was convicted in 2008 of falsifying his company's financial books but saw his sentence suspended, now faces embezzlement charges.

The widespread perception that the families that run chaebol groups operate in a bubble with rules that differ from those applied to the rest of society may best be illustrated by the Hanwha chairman's history with the law. In 1993, Mr. Kim was arrested on charges of smuggling cash to help purchase a lavish mansion in Los Angeles. His comparatively light sentence was soon suspended, and he was released.

In 2004, Mr. Kim was given a light fine for giving illegal funds to a politician. In 2007, he was briefly jailed for an attack on bar workers who had attacked his son in a drunken brawl. While his bodyguards watched, Mr. Kim assaulted one of the victims with a metal pipe, the police said. He was released when his sentence was suspended.

Mr. Kim returned to Hanwha's management after being pardoned by President Lee Myung-bak.

In the latest case, Mr. Kim was accused of illegally using money from Hanwha affiliates to support subsidiaries he and his family owned. In his verdict Thursday, Judge Seo Kyung-hwan referred to a corporate culture at Hanwha in which Mr. Kim's underlings viewed him as a "God-like figure" and treated him with "unconditional loyalty."

Hanwha said Thursday that Mr. Kim would appeal the ruling. The Federation of Korean Industries, a lobbying group, voiced concern about a case involving a prominent businessman "at a time the economy is in trouble."

The first sign of tougher sentences for the South Korean business elite came in February when Lee Ho-jin, the chairman of a relatively minor chaebol called Taekwang Group, was sentenced to four and a half years in prison for embezzlement and was immediately jailed.

"This in a way is unprecedented," Kang Jeong-min of the civic group Solidarity for Economic Reform said about the ruling Thursday against Mr. Kim. "People's demand for economic justice is stronger than ever. Politicians and justices can no longer ignore it."

This year, a movie based on the real-life story of a former mathematics professor who attacked a judge with a crossbow because of a verdict he considered too lenient became a box-office hit. It was just one of several films that have tapped into widespread mistrust of the judiciary.

Lee Ki-ung, an official at the Citizens' Coalition for Economic Justice, said the verdict against Mr. Kim still would not be viewed as fair by the public. The Supreme Court had recently recommended that a businessman convicted of embezzling more than 30 billion won be sentenced to at least five years in prison. Mr. Kim's four-year sentence for embezzlement worth 300 billion won can be viewed as comparatively light, and his fine of 5.1 billion won represents a tiny fraction of the sum embezzled.

Both the governing party and opposition parties in South Korea have advocated rules that would make it more difficult for judges to give light sentences. But Mr. Lee cautioned that politicians might just be showing a tough stance on chaebol to attract more votes.

"We will have to wait and see whether they will completely forget about their promises once the presidential election is over," he said.



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