Hanwha chairman gets 4 years, fined $4.5M for embezzeling
Ruling shows a tougher stance against wrongdoing by company leaders.
SEOUL, South Korea: The chairman of Hanwha Corp., one of South Korea’s largest industrial conglomerates, was sentenced to four years in prison and fined $4.5 million for embezzlement in a ruling that experts say shows a tougher stance against wrongdoing by leaders of the country’s mightiest companies.
Kim Seung-youn used his influence over Hanwha affiliates to aid his brother’s near-bankrupt companies, which caused over $252 million in losses at the Hanwha-controlled businesses, Seoul Western District Court said in a statement. Hanwha is South Korea’s 10th largest chaebol as the country’s conglomerates are known.
The court also found Kim guilty of forcing Hanwha’s affiliates to sell shares in an oil company to his sister at below-market prices to help his sister’s attempt to acquire the company. He also dodged taxes by trading shares under his employees’ names.
According to documents that authorities confiscated from Hanwha headquarters, employees were instructed to regard Kim as a god-like figure and “an object of absolute obedience.” The company’s authoritarian culture allowed Kim to steal corporate funds, the court said. It was not his first scrape with the law. He was pardoned in 2008 after a conviction for beating a worker.
Following Thursday’s ruling, Kim was taken into custody to start serving his prison sentence, a surprising development in South Korea where chaebol bosses are national icons and often regarded as beyond the reach of the law.
According to Chaebul.com, a website on South Korea’s leading conglomerates, courts gave suspended sentences to the seven executives from the top 10 chaebol who were convicted of crimes since 1990. Presidential pardons have often followed convictions of chaebol bosses.
“The chief of South Korea’s top 10 business being immediately jailed after the first ruling, that is an important sign that shows a change in the South Korean society,” said Kim Sang-jo, a professor of economics at Hansung University.
The lenient punishments and presidential pardons given to the prominent business figures stem from a perception that took root in the 1960s that their absence from society could undermine the economy. Family-owned industrial groups helped develop South Korea from the ruins of its 1950-1953 war with North Korea into Asia’s fourth-largest economy and one of the wealthiest.
“There is an ingrained perception that if people like Lee Kun-hee get arrested, South Korea’s economy could be shaken,” said Kim, the professor.
Hanwha spokesman Kim Young-sik said by phone that Kim Seung-youn and a dozen other Hanwha employees who were found guilty will appeal the court’s ruling.
Hanwha’s Kim, along with Samsung Chairman Lee Kun-hee and Chung Mong-koo of Hyundai Motor, were pardoned by President Lee Myung-bak in 2008. Kim had been found guilty of beating a worker at a bar with a steel pipe after a scuffle with his son.
Kim took the top job at Hanwha in 1981, succeeding is late father and Hanwha founder to run the industrial group that has wide-ranging businesses in explosives, chemicals, trade and construction.
Founding family members at Hanwha, as well as at many other South Korean businesses, have a very tight control over the company, which can help fast-decision making but also make it difficult for the employees to challenge wrongdoings.
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