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No leniency for tycoons
Publication Date : 20-08-2012
Was it the court’s signal that it would no longer exercise leniency toward criminal tycoons? A Seoul district court caused consternation among Korean business leaders last Thursday by putting Hanwha Group chairman Kim Seung-youn into prison right after handing down a guilty verdict.
Kim was indicted in January 2011 without detention on charges of embezzling 320 billion won (US$281.9 million) from group subsidiaries and thereby inflicting damage amounting to 480 billion won on them. The court sentenced him to four years behind bars along with a fine of 5.1 billion won.
The verdict was harsher than with those rendered to other tycoons involved in similar previous cases, such as Samsung Electronics chairman Lee Kun-hee, Hyundai Motor chairman Chung Mong-koo and SK Group chairman Chey Tae-won.
Although their crimes were all serious in nature, the three all got a relatively light sentence? three years’ imprisonment with five years’ suspension of execution. Thus, they could all avoid incarceration. But this may not be case with Kim if the sentence in the first trial is maintained in later trials, as a suspended sentence is only available for sentences of imprisonment of up to three years.
The ruling rendered to Kim was thus interpreted as a signal that the court has decided to mete out harsh punishment against business big shots. Some associated the court’s move to political parties’ push for “economic democratisation.” One major tenet of this drive is to regulate chaebol’s illegal practices to ensure a fairer distribution of wealth.
Yet it was not the first time that a chaebol owner got a lengthy prison term without a suspended sentence. In February, Lee Ho-jin, the former chairman of Taekwang Group, was sentenced to four and a half years in prison. The court ordered him to be incarcerated right after sentencing.
The change in dealing with cases involving business bigwigs was prompted by the new sentencing guideline hammered out by a committee of experts from the Supreme Court, civil society and various social fields. The guideline suggests four years’ imprisonment as the minimum punishment against someone who embezzled 30 billion won or more.
The verdict against the Hanwha chairman indicates that the court follows the new sentencing standards strictly. This new sentencing trend is in sync with growing efforts in Korean society to promote fairness and equity.
All this sends a clear message to tycoons: They can no longer commit a serious crime and get away with it. In the past, they sought leniency citing their contribution to the development of the national economy or the negative impact their long imprisonment would have on the operation of their corporations. This won’t work anymore.
Therefore chaebol chairmen should comply with business laws and regulations. They need to realise that compliance failures inflict the biggest damage on the reputation of their groups. They are the principal guardians of their corporate reputation. They should not damage their prised reputational capital by doing such things as taking company money for their own use without proper authorisation.
US$1 = 1,135 South Korean won