Uncommonly harsh ruling for corrupt Hanhwa chairman

Posted on : 2012-08-17 13:54 KST Modified on : 2012-08-17 13:54 KST
Court ruling may be sign of stricter treatment for chaebol heads, but could also be overturned in appeal
 staff photographer)
staff photographer)

By Park Tae-woo, staff reporter

Hanwha Group chairman Kim Seung-youn was sentenced to four years in prison yesterday for embezzling about 300 billion won (about US$264 million) from his company.

In a rare move for a businessman, the court ruled that Kim, 60, be taken directly to prison after the ruling. The decision is being taken as a sign that courts are no longer planning to go easy on chaebol heads accused of embezzlement and breach of trust.

Traditionally, courts have given suspended sentences in such cases, arguing that the businessmen involved deserved leniency for “contributing to economic development.” Kim’s case may be a sign that corrupt businessmen may be subject to stricter sentences.

“Three suspended for five” officially over?

The sentence of “three years in prison suspended for five years” has become a standard for conglomerate chairs convicted of crimes such as funneling company money into a slush fund or damaging the company with their efforts to hold onto or pass on management rights.

The list of chaebol heads receiving this sentence is a long one. Samsung chairman Lee Kun-hee got it for tax evasion and breach of trust, and Hyundai-Kia Motors chairman Chung Mong-koo for embezzling over 60 billion won (US$53 million) and causing over 110 billion won (US$97 million) in damages through malfeasance. Others include SK Group chairman Chey Tae-won, Doosan Group chairman Park Yong-sung, and Hanjin Group chairman Cho Yang-ho.

The criminal code stipulates that only sentences of up to three years can be suspended.

Courts have traditionally made the discretionary judgment to mitigate their punishments under “extenuating circumstances,” reducing the sentences by as much as half and suspending them in consideration of things like contributions to economic development. This resulted in a public outcry, with critics accusing the courts of going easy on chaebol heads and letting them off with a slap on the wrist. Some even suggested that the minimum sentence in the Act on the Aggravated Punishment, etc. of Specific Economic Crimes, which applies to embezzlement and malfeasance damages of 500 million won (US$441,000) or more, should be lraised to seven years, which would prevent the issuing of suspended sentences.

In 2009, the Supreme Court set the standard for punishment according to the amount obtained through embezzlement and breach of trust. The basic sentence for sums of 30 billion won (US$26.5 million) or more would be five to eight years in prison, which could be increased or reduced according to other factors.

Courts already hinted at a sterner response to corporate wrongdoing by sentencing Taekwang Group chairman Lee Ho-jin to four years and six months in prison following his conviction last February of making off with tens of billions of won through embezzlement and/or breach of trust. The court also arrested his mother, breaking with a longstanding practice of not detaining family members.

More to come?

“It is worth reflecting on the lenient sentences courts have given over the years for white collar crimes by chaebol heads,” said one court president. “Quite apart from the way it makes the ordinary people feel about the law and the social atmosphere it creates, we need to have strict rulings that are based on the nature of the crime and sentencing standards.”

The remarks suggest that more heavy sentences for corporate corruption can be expected in the future.

But some observers are disputing the trend, noting cases where defendants sentenced to do time in the first ruling subsequently received suspended sentences in their appeal, as took place with Chung Mong-koo and Chey Tae-won.

It is also awkward for courts to make rulings that depart from sentencing standards, since they have to record their reasons for doing so on their written judgment. However, as Kim Seung-youn’s ruling indicates, it is typical for courts to rule for the minimum set out in the sentencing standards.

This willingness to punish chaebol corruption will be put to the test this fall, when a verdict emerges in late September or early October in the trial of Chey Tae-won. Chey and his younger brother, SK vice chairman Chey Jae-won, are on trial in Seoul Central District Court for embezzling tens of billions of won from their company.

Trials are also under way in Seoul Nambu District Court and Seoul Central District Court, respectively, for Kumho Petrochemical chairman Park Chan-koo and Hi-mart CEO Sun Jong-gu.

 

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