Last week Seoul High Court finally made official. Chung Mong-koo will go free on a three year suspended sentence for stealing just shy of US$200 million from Hyundai Motor and causing about the same amount of damage to the company. This is hardly surprising. I am pretty bitter about this all, especially the ludicrous argument the court gave when Chung was initially convicted.
However you now got to love the way Seoul High Court finds a way to rub salt into the wounds of the poor Hyundai Motor’s shareholder. Ever since he was convicted Chung was trying a beat the rap by donating W1 trillion (US$1 billion) to various social groups. The Seoul High Courts message on that was basically “Oh, Mr. Chung your too generous a person!”, as the court says Chung can get away with donating around 15% less then he originally offered.
(In an important tangent, does anybody know what oversight there will be on the donation? Will the trillion go to “The Hyundai Motor Art Museum”?, “The Hyundai Motor New Ulsan City Park Project”. the “Hyundai Motor Executive’s Retirement Home”?…)
Now for the more interesting thing. For the sake of argument lets just round up and simplify a bit. Chung has to pay around US$1 billion to charity from his own pocket as part of the deal to go free. Now Forbes lists Chung’s wealth at only US$2.2 billion. In other words, Chung will have to give over half of his wealth, theoretically. Meanwhile he retains any salary and perks as part of Hyundai Motor. He will likely get a similar yearly dividend of around US$25 million this year. Also consider it has been proven he has embezzled at least US$200 million from a company HE STILL IS THE CHAIRMAN OF!
How much you want to bet Mr. Chung’s Forbes number will NOT be US$1.2 billion next year?
31 Comments
dram_man, after you’ve finished catching a breath, would you be so kind as to make a point?
or, did you merely want to share your righteous indignation with the rest of us. if so, you might want to review the weekend’s open thread. Seth Gecko spouted off on this subject, too. The best response to him, IMHO, came from sanshin(?), which I’ll paraphrase here: “Nothing new. Happens all the time here. Welcome to Korea.”
And by the way, I really hope you’re not an English teacher.
This is the same feeling I have and I’ve posted about it on Korea Law Blog. Especially when contrasted with the hyperventilation over Lone Star, the Chung Mong-koo slap on the wrist is a slap in the face for rule of law.
Off-topic & help needed.
My experience cautions for me not to have much trust on English-Korean dictionary.
Suspended sentence? It sounds that sentence is suspended, and if correct, it’ll be more near to 선고유예(which means suspension of sentence of punishment) of Korea. 집행유예(which means suspension of execution of sentenced punishment) will be probation, I think.
the probation/walk is appropriate in this case.
Fully appropriate.
1st, this case started as a 3rd world country-esque charge of corruption. It was a purely political revenge of sorts and nothing more.
2nd, Hyundai Motors, like it or not, is one of the main arteries of the South Korean export machine. I’m not sure how competent this Chung is in running the beast, but this beast has grown to become finally acceptable in quality and durability during this Chung’s tenure. He should be there to captain the ship, instead of jail for bogus political corruption charges.
A major flaw with the South Korean prosecution system is that the DA takes orders from the Chung Wa Dae. Especially on political ones. He might not have done anything wrong, except make Roh unhappy for some reason.
furthermore, this Chung is not the first upperclass to get a slap in the wrist. Precedence was already set by someone else a long time ago.
“How much you want to bet Mr. Chung’s Forbes number will NOT be US$1.2 billion next year?”
I think he claimed that he would donate the money over a seven or nine year period, so I wouldn’t imagine his net worth to suddenly drop all that. If it ever does of course. Is there any guarantee that Chung will come through with the cash or is his “word” somehow sufficient? (I mean, how could you not trust a known and convicted felon?!)
Chun Doo-hwan still hasn’t come through with the money he is supposed to return - though at one point he claimed rather lamely to be worth only a few hundred thousand won - and he isn’t rotting in jail yet. (Hell is another matter, but we’ll have to wait and see…)
But, Chung isn’t the first - Chey Tey Won of SK and the Hanwha chairman/don also come to mind - to be convicted of felonies (of the money stealing variety) and remain chairman of their company. He almost certainly won’t be the last either.
This carny game is rigged. Too bad that Korea’s citizenry - the people who are really being spit on by this kind of decision - don’t have the same zeal for marching on the High Court or corporate HQs as they do for protesting at certain foreign embassies. Guys like Chung must be laughing to the point of pissing themselves.
I don’t really want to defend chung but I think it’s fair to say that at some level he is a victim of the system. In social science parlance, you might say the problem has been institutionalized. Essentially, to get anywhere (yes, even today) wheel’s have to be greased. It’s not like it was in the old days but my understanding of the charges is that Chung’s slush fund activities date back to the “old days.” Now, enter a regime whose aim is not so much to crack down on white collar crime as it is to crack down on rich guys, and you have Chung as a (bit of) a victim.
I saw Chung up close and personal not too long ago at an EU luncheon. Didn’t look any worse for wear so it’s hard to have too much pity. I only make this point because the system is not so simple as many of our naive posters would like it to be.
And, it’s time to take off your western-colored glasses and realize that this kind of shit happens in the west too. Elliot Spitzer has been very successful only because he’s smart and aggressive about exploiting the law. But if you have enough money you can buy a good lawyer and get yourself out from under a white collar crime indictment. The main difference being that you likely don’t get to keep your chairman’s job.
Another issue, however, is the great strides that Chey Tae-won made in cleaning up SK. It’s a totally different company since the Soverign Assest Management issue and Chey’s own (too brief) brush with the law. i.e. Things can change for the better.
wjk,
Maybe I misunderstood what you were trying to say…but it seems like you’re missing an important point: he probably wouldn’t have been convicted without plenty of evidence that supports the charges.
If you were insinuating that the fact he was the only pinpointed means that politics were involved since others do the same…Well, that hardly consists a good defense, does it? Using that logic, Ben Johnson should have kept the gold because nearly all the other sprinters in the final race at the ‘88 Games eventually tested for banned substances.
Sure, it’s just the same in America for corporate crooks — just ask Richard Scrushy, John Rigas, Timothy Rigas, Ken Lay, Jeffrey Skilling, Bernard Ebbers, Joseph Nacchio, Michael Milken and Martha Stewart, among others. Slap on the wrist.
The hypothesis that Chung was prosecuted for having angered the current political regime is bizarre. Unlike Chey at SK, the Hyundai fund was used for political bribes. While businesspeople from Glovis, Autonet, Korea Development Bank and PricewaterhouseCoopers were questioned and in some cases fired, I don’t think a single politician was named. Nonetheless, Chung himself admitted to the prosecutor’s claims that the money was used as a political slush fund.
Does anyone imagine that Chung would let himself be jailed without dropping a few names?
Michael Milken was a misunderstood visionary, and does not deserve to be lumped in with thieves like Ken Lay, and amateur greed-o’s like Martha Stewart.
Michael Milken does belong on the list if your criteria for membership is “white collar criminals who went to jail for substantial periods of time rather than being let off scot free and returned to chairmanship of the company.”
I don’t put Martha Stewart in the same category as Ken Lay or Richard Scrushy, either. But the fact is, Martha served time.
Apology accepted.
To carry it a bit further, I would say that dragging Chung through the court system like that was indeed at least a degree of punishment. He did spend time in jail (not much.. ) and it did affect his company. In one sense, it shows that prosecutors were willing to mess with Korea Inc to the point that Hyundai even delayed a product launch. I think a lot of people enjoyed being able to point to the fact that a major Korean congomerate was being held to task at the same timt that a foreign concern (LS) was also being dragged through the mud. The fact that the court went lenient in the end does not mean that there wasn’t good progress. tigher regulation of white collar crime doesn’t happen overnight.
but consider this: Like most people, I’ll be happy to see Roh gone after this year. I personally like Lee Myungbak and think he’s the only credible candidate but…what if he decides to turn back the clock on white collar crime prosecution?
mjw,
Thank you. I needed some morning comedy.
If it is more-or-less linear progress toward better corporate governance, mjw, then that’s fine. But it might not be.
Korea has a corporate elite and a political elite. Neither is fully dominant, and they spar with each other to increase their power. That’s normal. The political elite can use legislation (or the threat of it) to grab power from corporations, and corporations can use their investment allocations (especially the threat of moving their operations out of the country) to grab power back from the politicians. Normal. I might say even healthy.
But the courts are not supposed to be part of the political arsenal. They are supposed to be independent. The Hyundai slush fund scandal may be an irreversible step on a path toward better governance, or it may just be part of the back-and-forth sparring between the two elites. I’m not sure.
If SK is a different company, it’s because of pressure brought on them by what Chey Tae-won did, not because of some internal desire for change. Thank Soverign and Hana Bank for that, not Chey and a global rise in the price of petroleum.
Milken was indeed an innovator, but he wasn’t misunderstood and he eventually did step over the line into criminality. A colleague of mine who was an AUSA in the NY US Atty’s office at the time and participated in the prosecution of Milken and was responsible for debriefing Milken after he went to jail as part of the arrangement under which Milken got a lighter sentence than otherwise would have been imposed more than convinced me of the last.
So…I guess you think “visionary” is too strong a word, then?
LinkD,
I take your point and agree. What I have a problem with is the notion that the courts “are supposed to be independent.” You and I understand the value of an independent judiciary. But it is questionable whether that construct can ever be truly replicated anywhere outside of “the west”. (and, the supreme court ruling in the first Bush victory should at least cast some doubt on the vaunted independency of America’s third branch.) And I guess my main point is that viewing what happens here through that kind of idealized filter blinds us to the value of some of the changes that have take place.
Which brings the point full circle to yours about the linear nature progress. I’m not so troubled if the country takes one step back after taking two forward. And that’s what I see in the Hyundai case. They prosecuted the hell out of Chung. Put him in jail, through the wringer, and destroyed his reputation overseas. There was also major damage to the company, which opened the door for a lengthy series of articles exploring Chung’s micro managment style. Not bad work. Then the courts (predictably!) went easy on him. All in all, the system has moved forward.
The Koreans have largely cleaned up their electoral system. Business corruption is thornier, but they’re trying. Let’s not get ourselves all in a lather like Dram-man when the courts go lenient on this kind of thing. Understand it for what it is.
The great father-figure must never be held to any sort of real accounting or responsibility. He does what he wants, and you shut up and endure it. Even his enemies are patriarchs too, and have no interest in setting this kind of precedent. Understand this fact of the Korean psyche and many things in Korean politics make more sense.
For example, one can perform a coup d’etat, butcher citizens on the street and all manner of illegal things for almost a decade, but besides some for show finger-wagging great father-figure Chun DooHwan enjoys his wealth and retirement as I write this. I’ve heard his short jail time was very cushy, too. KDJ has admitted illegaly sending half a billion dollars of taxpayers money to the north, and he wasn’t even investigated or charged - his symbolic son took the slap on the wrist of jail for a year.
I remember asking numerous Kwangju citizens if they thought Chun should hang, really actually hang from the neck till dead, and each person with a conflicted look on their face said no. A patriarch, a father-figure take real, not symbolic, punishment? The great Korean father is not accountable - Chung Mongkoo is merely the latest.
There’s a new example every year or two.
Yeah…I guess…maybe…sort of…
In a numerical nutshell, what it is, is the Korea Discount. The P/E ratio that serves as our best indicator of what the company’s shareholders (owners) really think about the big picture. That hasn’t changed much, has it?
I’m in no lather, but then, I don’t hold any Hyundai shares.
And if you think Chung is going to actually pay out 1 trillion won to a place he can’t get it back, then I’ve got oceanfront property in Arizon I’d like to sell you. That part is so much smoke up the Korean public’s ass.
kum chal is never independent from Chung Wa Dae.
Fact One. This may change.
Fact Two.
US Supreme Court simply called a recount illegal based on law that existed prior to Bush and Gore. USSC didn’t help Bush out. They just interpreted the law. If I’m not mistaken the vote was 7-2. That’s hardly along Republican and Democrat lines. And you should discount whatever justices said after the vote. I mean, if they felt that way, the should have voted otherwise, no?
well, before getting shot down, I’d like to make an amendment. There were two votes. 5-4, then another a month later 7-2.
Wasn’t planning to convert a Democrat into a Republican anyway.
http://news.bbc.co.uk/2/hi/south_asia/6986584.stm
Exhibit A. Pay attention to it.
This goes on a lot in many countries. Executive branch’s charge is corruption.
There is no contest.
In the above case, he would preferred to jail him or kill him, but Father Bush is looking down and breathing behind his neck, so…
wjk, I don’t get it. Are you citing the Nawaz Sharif matter from Pakistan in order to excuse the Seoul Court of Appeals’ light sentence of Chung Mong-koo, on the thesis that “Everybody does it”? Or that because Pakistan kicked out a challenger to Pervez Musharraf it means Chung was unfairly accused in a political proseuction? I suspect that’s what you’re doing, because you have a habit of that kind of thing.
Pakistan is a third-world shithole with a deeply dysfunctional governance system and a shaky grasp on rule of law. Pakistan is not someplace for Korea to be benchmarking.
PakistanKorea is athirdsecond-worldshitsinkhole with a deeply dysfunctional governance system and ashakyhypocritically instrumentalist grasp on rule of law.Yes, Mr. Carr. Pakistan is 3rd world. Unfortunately some aspects of Korea are still 3rd world. I am excusing the Seoul Court, in the context of the country which it operates in. Blame Chung Wa Dae. Seoul Court takes marching orders. And yes, Chung was unfairly accused in a political prosecution. Yes, what you’re suspecting is pretty much right on. Yes, I have a habit of that kind of thing.
It’s like you’re reading my mind… Just kidding
May Hyundai prosper.
May Korea have truly independent executive, legislative, and judical branches of government.
If the Chung story wasn’t enough, Kim Seung Youn, Hanhwa Group chairman/gangster just got a suspended sentence for the infamous revenge beating/kidnapping of earlier this year, reversing a lower court’s 18 month prison sentence. Another discraceful day for justice in Korea, not to mention another kick in the balls to the Korean people. Shit, it doesn’t even have to be Buddha’s Birthday or 8/15 for the rich, powerful, and crooked of Korea to escape sentences for felony convictions! But at least Korea isn’t as sketchy as Pakistan, so I guess people should be counting their blessings, right?
Yeah, back-to-back get of jail free cards is a little rich.
Kind of felt like Bill Murray in Groundhog Day reading about that.
And this guy, Kim Seung Youn, sounds like a real slimeball. When news of this story originally broke, the media reported one of this guy’s earlier exploits.
Seems that at a nightclub a couple years ago, dissatisfied with the service, he demanded that a female employee get on her knees. He then smashed a whiskey bottle over her head, splitting her head open and knocking her unconscious. She was in the hospital for a month. No charges were filed. A real fucking class act.
The only thing worse then the fact that these guys think they’re untouchable is fact that, in most cases, they are.
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