The head of the world's sixth largest automaker on Thursday escaped a jail sentence for creating a multi-million dollar slush fund, after an appeal court ruled that his imprisonment would badly damage South Korea's economy.
The Seoul High Court quashed a three-year prison sentence on Hyundai Automotive Group chairman Chung Mong-Koo and replaced it with a suspended sentence.
It ordered him to undertake community service — including delivering speeches and writing articles on the need for ethics in business — and to make good on his pledge to donate one billion dollars to charity.
“The court has been agonising over whether to put the accused in jail or keep him out of prison,” said chief judge Lee Jae-Hong.
“But in consideration of the huge economic impact that could result from imprisonment, it decided to suspend the sentence.”
Chung, 69, had been sentenced to jail in February for breach of trust and embezzling 90 billion won (97 million dollars) in company funds through fraudulent accounting. He had been on bail pending appeal.
Auto business leaders and Hyundai hailed the decision but activists campaigning to clean up the country's corporate culture expressed dismay.
The group, which includes affiliate Kia Motors, controls 70 percent of the country's auto market and accounts for 5.4 percent of gross domestic product.
Prosecutors accused the Chung family of raising the slush fund to bribe government officials, politicians and bankers in return for business favours. They had urged the appeal court to double the original jail term.
“We are greatly relieved that this matter is finally over,” Hyundai said in a statement. “We can now devote our full energies to addressing the numerous challenges that face us and building a global brand.
“We look forward to honouring our commitments made earlier to expanding our corporate social responsibility, the funding of charitable causes and improving management transparency.”
Chung had admitted the existence of the slush fund but said he was not directly involved in embezzlement. He had said he felt “ashamed and sorry” for failing to correct past malpractices.
The massive conglomerates, known as chaebol, spearheaded the economy's dramatic recovery from the ruins of the 1950-53 Korean war. But their business practices were blamed for helping trigger the financial crisis of the late 1990s.
“The court gave an indulgence for criminal activity and corporate corruption by businessmen,” Park Kun-Yong, of the People's Solidarity for Participatory Democracy, told AFP.
“The ruling reminds us again that chaebol can get away with anything. Our country must not tolerate business misconduct by chaebol any longer.”
Separately, the antitrust watchdog announced a fine of 63.1 billion won (67.1 million dollars) on Hyundai Motor and four affiliates.
The Fair Trade Commission said they had illegally subsidided other Hyundai units by paying excessive sums for supplies.
“(We're trying) to improve the current market environment, in which business outcomes largely depend not on competitiveness but on a company's affiliation,” said commission official Kim Won-Joon.
Kang Chul-Koo, general director of the Korea Automobile Manufacturers Association, welcomed the appeal court's decision.
“As global competition in the auto industry is getting tougher and tougher every day, the court has given chairman Chung an opportunity to make contributions to the country's auto industry and economy,” he said.
Chung's lawyers have said the slush fund was spent helping improve the productivity and morale of employees and expanding sales networks, as well as for making donations to politicians.
Chung took over the group in 1999 and aims to make it the world's number five carmaker. Analysts credit him with transforming it into a leading global brand by focusing on quality.
