No Charges Brought Against Most of Five Conglomerates Accused of Misfeasance

The Investigation Department of the Seoul Central District Public Prosecutors’ Office (director: Hwang Yoon-seong) announced yesterday that 81 people out of 83 accused, including Samsung Chairman Lee Geon-hee, were free of charges of misfeasance in office. The People’s Solidarity for Participatory Democracy (PSPD) had accused 83 people working for five conglomerates—Samsung, Daewoo, Hyundai, SK, and LG— including their chairmen, of misfeasance in office.

The only charge the prosecutors’ office recognized was one on Hyundai Electronics (now Hynix). Kim Yong-hwan, the former president of the company, had his indictment suspended. Chung Mong-heon, the company’s chairman who committed suicide last year, was sentenced to “no right of arraignment.”

The PSPD reported 83 people working for the five conglomerate companies to the prosecution on charges of misfeasance in office, saying, “The five companies supported their affiliate companies inappropriately, resulting in losses to their companies.” The PSPD filed this charge after the Fair Trade Commission (FTC) handed down a fine of 70.4 billion won in September 1998 to the five conglomerates for illegal insider dealings and ordered them to correct their misconduct.

The prosecution explained that the other companies on the list, excluding Hyundai Electronics, were found innocent after considering the circumstances they were facing: that their support was temporary in order to prevent even bigger losses that would have occurred with the bankruptcies of the affiliate companies. In the end, all the money was eventually returned and therefore, caused no real monetary loss. And as the amounts were small compared with their company sizes, their actions can be considered reasonable business decisions.

The prosecution also said that the criteria the FTC uses to determine whether conduct is “a violation of fair and free competition,” while “a misfeasance in office,” which is a crime in the criminal law, is decided by whether the conduct “deliberately caused loss to the company.” It explained that therefore, the inappropriate support these conglomerates gave to their affiliates cannot be viewed as misfeasance in office.

The Hyundai-affiliated companies, including Hyundai Electronics, accepted without approval from their board of directors or security, bills amounting to 349 billion won issued by the Halla Group right before or after its bankruptcy at the end of 1997.

The prosecution explained that such support for the Halla Group is considered misfeasance in office, but it was a decision made by Chung Joo-young (deceased), who was then the chairman of the Hyundai Group, and the government as well as the creditors of the Halla Group had also asked the Hyundai Group to support Halla during the foreign currency crisis. That is why Kim Young-hwan received a suspended indictment, the prosecution said.

An official at the prosecutors’ office said, “We collected statements from all the accused people and did thorough investigations into all of them, but could not prove them guilty.”

Regarding the prosecution’s announcement, the PSPD refuted it, saying, “A misfeasance in office can be applied to any case even when there is only the possibility of loss. Issuing an indulgence to the conglomerate practice of inappropriate inside support only because they are business decisions is not right.” Meanwhile, the five conglomerates filed administration litigation lawsuits, refusing to accept the decision by the FTC, and their cases, excluding the Hyundai Electronics case, are currently pending. In April, Hyundai Electronics received a final judgment from the Supreme Court that recognized most of its support as illegal.

Sang-Rok Lee myzodan@donga.com