SEOUL — The head of SK, one of the largest South Korean conglomerates and owner of the largest mobile carrier and biggest oil refiner in the country, was arrested in a Seoul courtroom Thursday after he was sentenced to four years in prison for embezzlement.
The court’s decision to have Chey Tae-won, 53, detained and dispatched to prison from the courtroom, pending his appeal, was highly unusual in South Korea, where judges have a reputation for being lenient toward powerful tycoons convicted of white-collar crimes.
Until recently, such tycoons rarely spent any time in prison, as courts most often not only did not arrest them but also suspended their prison terms, citing their “contribution to the economy” and fears that their absence from management might hurt their corporate empires, and by extension, the national economy.
Mr. Chey was convicted of embezzling 49.7 billion won, or $45.6 million, from the mobile phone company SK Telecom and another SK subsidiary, SK CC, in 2008. SK is the third-largest South Korean corporation by assets, after Samsung and Hyundai.
“I didn’t do it,” Mr. Chey said in the courtroom. “I only learned about this in 2010, and that’s all I can say.”
South Korean courts’ attitude toward white-collar crimes has begun changing recently amid mounting public calls for “economic democratization.” During the presidential election campaign in December, all major candidates, including Park Geun-hye, who is now president-elect, championed the political catchphrase. They vowed to stop the country’s conglomerates from squeezing smaller businesses through unfair business practices, fight a widening income disparity and ensure that tycoons convicted of corruption will be punished properly.
In February last year, Lee Ho-jin, the chairman of a relatively minor conglomerate called Taekwang, was sentenced to four and a half years in prison for embezzlement and was immediately jailed. In August, a Seoul court sentenced Kim Seung-youn, head of the Hanwha conglomerate, to four years in prison for embezzlement and also sent him directly to prison from the courtroom. (Mr. Kim was paroled this month when a court ruled his illness was serious enough for hospitalization.)
Mr. Chey is the highest-profile tycoon yet to have faced the tougher sentences being imposed by courts.
This is the second time he has been ordered imprisoned for corruption. In 2003, he was arrested on charges of bookkeeping fraud, but his prison term was suspended, and he was released.
“He used the subsidiaries under his control as a tool for his crime,” the presiding judge, Lee Won-beom, said Thursday. “We had to face our duty to deal sternly with his crime before considering leniency.”
Former President Park Chung-hee, the father of Ms. Park, the president-elect, nurtured a handful of family-controlled businesses with easy credit, subsidies, tax benefits and protection from foreign competitors during his rule in the 1960s and ’70s.
They soon grew into the conglomerates, known locally as chaebol, and led the rapid economic growth of South Korea. Today, the country’s 10 biggest conglomerates, mostly in the third generation of familial control, make up more than half the total value of the companies traded on the Korea Stock Exchange.
But the corporate behemoths have also faced repeated accusations of bribery, poor corporate governance and shady business deals, often to help the families of their chairmen accumulate wealth. The heads of seven of the country’s top 10 conglomerates, including Lee Kun-hee, chairman of Samsung Electronics, and Chung Mong-koo, the chairman of Hyundai Automotive, have been convicted of crimes like bribery, embezzlement and tax evasion. But none has spent more than a few months behind bars, as their sentences, usually three years in prison, were quickly suspended by judges and their criminal records erased in presidential pardons.
“We fear that the guilty verdict against Chairman Chey Tae-won may further stoke the anti-business sentiment widespread in parts of our society,” the Federation of Korean Industries, which speaks for big businesses, said in a news release Thursday.
Solidarity for Economic Reform, a civic chaebol watchdog, noted that four years in prison for Mr. Chey was hardly a tough punishment. Acknowledging widespread discontent, the Supreme Court recently recommended that a businessman convicted of embezzling about 30 billion won be sentenced to at least four years in prison. By law, a prison term of more than three years cannot be suspended.
“Today’s verdict is positive in that it broke the old pattern of giving a suspended three years’ prison term, but it still is the minimum punishment under the current guidelines by the Supreme Court,” the civic group said in a statement. “Our courts have two faces when it comes to punishing chaebol.”
Article source: http://www.nytimes.com/2013/02/01/business/global/01iht-embezzle01.html?partner=rss&emc=rss
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