scott9050

SEOUL, South Korea (Reuters) -- The head of Hyundai Motor was sentenced to three years in jail for embezzling funds from the world's No. 6 auto maker, dealing another blow to a company battling a rising won and restive labor unions.
The surprise ruling - the expectation was that Hyundai Motor Chairman Chung Mong-koo would get a suspended jail sentence -- initially sent shares in the country's top carmaker down over 3 percent Monday as investors worried about a management vacuum.
Chung, 68, wearing a dark grey suit, appeared shaken after the verdict. He quickly left the courtroom, which was filled to capacity with Hyundai employees, including Chung's son, Chung Eui-sun, the president of sister company Kia Motors Corp.
Chung, who will be appealing the sentence, was arrested last April on allegations that Hyundai and its affiliates set up slush funds to pay for political favors.
"Some people seem to think that Mr. Chung controls the whole company," said Kim Yung-min, fund manager at SH Asset Management.
"The fact is that the company is not ruled by just one Mr. Chung. The main impact will be on sentiment in the short-term."
Hyundai shares fell as much as 3.15 percent following the sentencing but recovered to close flat at 69,800 won. The broader market ended up 0.3 percent.
The court decided not to revoke Chung's bail terms immediately, citing the need to protect the national economy and to give him time to prepare his appeal.
"Chairman Chung retains full operational control and decision-making authorities for the long term strategic issues affecting the company and its affiliates," said Hyundai spokesman Jake Jang.
Management vacuum
Some analysts remained worried about the management uncertainty at the auto maker and its affiliate Kia Motors, which account for nearly 7 percent of South Korea's total exports.
"This could have an impact on the Korean economy," said Kim Hyun-tae, fund manager at Landmark Investment Management.
"Hyundai is a big employer and there are also parts suppliers and other sectors that depend on the auto sector. Along with semiconductors, autos are a major South Korean export item. So Hyundai's impact on the Korean economy is huge."
Prosecutors last month demanded a six-year jail term. Auto analysts had expected the court to hand down a suspended jail term to leave Chung at the helm of Hyundai, given the group's importance to the South Korean economy.
In 2004, the Seoul high court suspended a three-year jail term for fraud handed to Chey Tae-won, chief executive of SK Corp., South Korea's top oil refiner, so he could carry on running the company.
Chaebol in the spotlight
Chung is the eldest surviving son of the late Chung Ju-yung, who founded the Hyundai Group in 1947 and Hyundai Motor in 1967. He took control of Hyundai Motor in 1999 from his uncle Chung Se-yung, who is credited with Hyundai's rapid growth and was nicknamed "Pony Chung" after its first model.
The chairman admitted last year to having a role in setting up slush funds through affiliates of Hyundai, although he denied knowledge of details on the funds.
Chung, heavily involved in most decisions at the group, was released on $1 million bail in June after two months in jail.
The case has put the spotlight on management shortcomings at South Korea's powerful "chaebol." These family-run conglomerates helped rebuild the economy after the 1950-53 Korean War but were partly blamed for the financial crisis of the late 1990s.
Despite reforms brought in after the 1997-98 Asian financial crisis, some conglomerates are still run like family businesses, shifting money among group companies and using complex share ownership networks to control their business.
In 2005, two executives at Samsung Group, the country's top conglomerate, were found guilty of conspiring in 1996 to help the children of the group's chairman to buy a majority stake in affiliate Everland at below-market prices.

ProudPony

I have posted many times that it happens over there all the time. I have seen it personally. They make no bones about it.

That is a different culture over there. Things we see as bribery or blackmail are not viewed as "illegal" or even "immoral" in many cases.

For example, if you REALLY need your equipment to get through customs in a timely and organized fashion, it is appropriate to invite a customs manager out for a dinner so you can explain the need for your stuff to get through quickly. After a very nice meal, and perhaps a few bottles of wine, karaoke, some pretty girls for them to dance with, etc, the guy will express how happy he is that you took the time to explain your position, he understands your need, and that he will do what he can to be sure that your things are moved along promptly. Perhaps he could even ask for a "follow-up" meeting to discuss how well customs responded to the situation.

If you simply allow your shipment to hit the docks and expect them to be released ina day or two... well, I hope you have something else you can do. They will likely release your stuff when they need room for other things coming in.

Corruption (as we know it in the West) is rampant in Asia, but what we don't understand over here is that this is how "business" has been done over there for 5000 years, and it is not likely to change overnight. It will take much more episodes like the one with Samsung and Hyundai to cause them to reconsider their policies of daily business.

Lastly - but definitely not the least significant issue is this... he was found guilty of "setting up slush funds to pay for political favors".
Anybody notice that? POLITICAL favors?
The kind of favors that...
*allow them to use basic labor at virtually no cost, healthcare, or other obligations.
*allow them to export goods through ports without tarriff or lading charges.
*prevent competition from bringing competitive foreign goods INTO the same ports/markets.
*allow up to 30% taxation on competitive foreign goods that are sold in that country.
Etc... etc... etc. You get the picture.

Here in the USA, our Automotive companies have recently lobbied our government for help in leveling the playing field, and got berated and belittled for doing so, being told to "make a better product and it will all work out."
Apparently, "we Americans" don't want government meddling in business affairs - even though the government is responsible for trade issues, foreign policy, and those petty thiings like that.

http://www.usatoday.com/money/autos/...ers-bush_x.htm
http://web.camaross.com/forums/showthread.php?t=425645

Sometimes I think we are our own worst enemies.
Kudos to someone in Korea for finally doing something to thwart corruption though.
I hope he's not found dead next week at his home in the valley.