Hyundai Motor Co.

Hyundai Motor's Chung to be retried on embezzlement

Hyundai Motor Co.'s Chairman Chung Mong Koo will be retried for embezzlement and breach of duty after South Korea's Supreme Court granted an appeal made by the prosecutor's office.

The Supreme Court voided the suspension of Chung's three-year prison sentence and will send the case back to a lower court, said Oh Suk Joon, a Supreme Court spokesman in Seoul.

Chung, 70, won the suspension last year after he pledged to donate nearly 1 trillion won ($1 billion) to charity. Prosecutors opposed the conditions granted to Chung, South Korea's second-richest man, following his conviction for setting up a fund for illegal political donations.

“It's unexpected, but investors are not going to sell because of this,'' said Park Hyoung Ryol, who helps manage the equivalent of $1.1 billion at Consus Asset Management Co. in Seoul. “The last time Chung was on trial the employees had to put on a show how much they needed the chairman, but companies depend on management systems, not just one man.''

Hyundai Motor rose 4.7 percent to 82,300 won at the close of Seoul trading, compared with the benchmark Kospi index's 0.9 percent gain. Kia Motors Corp., Hyundai's affiliate, climbed 9.2 percent to 11,900 won.

“We're perplexed by the ruling,'' Jake Jang, Hyundai Motor's spokesman said by phone following the court's decision. The company will consult with its lawyers after getting an official court notification, he said.

Labor, Donations

The Seoul High Court in September also ordered Chung to write articles and give lectures on lawful management along with keeping his pledge to donate funds to charity. Prosecutors appealed the case, saying the conditions the lower court set for the suspension were not supported by law.

Charity work should involve labor and not be paid for with cash, the Supreme Court said. The date of the retrial will be decided later by the Seoul High Court, said spokesman Bae Hyeon Tae.

Chung's legal woes since his arrest in 2006 forced Hyundai Motor and its affiliate Kia Motors Corp. to slow the construction of overseas plants and delay new models.

Chung and three other Hyundai Motor executives were accused of setting aside nearly 100 billion won without proper accounting.

During his original trial, Chung testified that he knew funds were being diverted without proper accounting and he felt overall responsibility for the creation and the use of the fund.

(Published by Bloomberg 11, 2008)