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SEOUL : The head of South Korea's largest automaker Hyundai Motor was convicted Monday and jailed for three years for creating a multi-million dollar slush fund to bribe politicians and officials.
Chung Mong-Koo, 68, was found guilty of embezzling around 90 billion won (US$96 million) through fraudulent accounting and of breach of trust, in what a Seoul court called a "clear-cut criminal act."
Chung, one of the country's richest men, remains free pending an appeal to a higher court. "It is very likely we will appeal the decision," defence lawyer Kim Jae-Jin told AFP.
His defence team had urged leniency, saying putting him behind bars could do further damage to the world's sixth-largest carmaker and even hurt the national economy.
But chief judge Kim Dong-Oh said Chung was guilty of all the charges against him - and while he did not impose the six-year term requested by the prosecution, he said Chung's behaviour was a blow to corporate self-regulation.
"The court cannot help but sternly hold him responsible," the judge said. "Wrong customs must be eradicated to make the South Korean economy advanced."
A stony-faced Chung refused comment as he left the court but a Hyundai spokesman described the sentence as "so harsh."
Chung reportedly amassed the secret funds to bribe politicians and officials.
Prosecutors said they suspected he used part of the money to facilitate the illicit transfer of corporate wealth and management control to his son.
He could have been given a life sentence after being convicted on all counts, but high-profile business leaders in South Korea have often received lenient sentences in the past.
Chung was arrested in April last year and spent two months in jail before being released on bail of one billion won.
The Hyundai auto group, which includes affiliate Kia Motors Corp, controls 70 percent of the domestic auto market and is the world's sixth-largest automaker.
Chung's legal troubles had delayed its plans to expand in Europe and the United States. Hyundai is also plagued by labour disputes, sluggish sales and growing price competition with its Japanese rivals due to the strong won.
The Asian financial crisis of 1997-98 prompted South Korea to introduce new laws and rules aimed at cleaning up the operations of the giant conglomerates known as chaebol which for decades have dominated the economy.
Several tycoons have come to trial in recent years but have often received relatively light sentences, and many analysts had predicted that Chung would receive a suspended sentence.
"Hyundai Motor is now at a critical juncture. If Chung goes back to prison, it is certain to hurt the company's image abroad, dealing a blow to its investment plans and decision-making process," Kyobo Securities analyst Lim Chae-Koo told AFP.
Chung hoped to turn the company into the world's fifth-largest automaker by 2010.
But its competitiveness has been eroded by labor disputes and resurgent rivals.
Strikes cost output of 115,683 vehicles worth 1.6 trillion won last year.
Net profit plunged 34 percent to 1.53 trillion won last year with sales slipping 0.2 percent to 27.34 trillion won due to the strikes and the won's rise against the dollar, which makes exports more expensive.
Its stock slumped nearly 30 percent last year, wiping out 6.3 trillion won in shareholder value. - AFP/ch
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