Hyundai Slush Money Could Be Returned

Prosecutors have embarked on a search for the whereabouts and uses of Hyundai and Kia Motors’ slush fund as part of an effort to return the wealth amassed by Hyundai Chairman Chung Mong-koo and his son, Kia Motors President Chung Eui-sun, to the National Treasury, reports revealed yesterday.

Such measures by the prosecution are based on the “Money Laundering Control Act” established in 2001, and it will be the first case where corporate slush funds are returned to the government.

The Supreme Public Prosecutors’ Office Central Investigation Division on Monday transferred prosecutor Lee Yong-il from the Modern Criminal Investigation department to the SPPO First Central Investigation team, which is in charge of the probe into Hyundai’s slush fund.

Prosecutor Lee specializes in tracking down and putting the brakes on criminal profits and currently holds the title of project team manager of a team in charge of “Money Laundering Investigations and the Repossession of Criminal Profits” that is set to commence its duties this May for the effective and centralized repossession of illegal profits from grave criminal acts such as in the form of slush funds or from malfeasance.

The prosecution has decided also to add a preliminary team, which will be comprised of five or six special investigators in addition to prosecutor Lee, in the search for the uses of Hyundai Motor’s slush funds. Once the team takes official form, Lee will assume the role as chief, and four other investigators will be added.

Prosecutors have decisive evidence that suggests the use of a considerable amount of tens of billions of won worth of Hyundai Motor’s slush funds in the merger of its subsidiaries and in the purchase of its own equities.

The Criminal Profit Control Act stipulates the state’s right to seize all illegal profits, i.e. profits acquired through crimes including shareholder misappropriations, the use of drug trafficking funds, manipulation of stock prices, and foreign exchange speculation.

It further states that the wealth amassed through the use of illegal funds, not to mention the illegal fund itself, will be subject to categorization as illegal profits.

A prosecution official added, “Until now, the prosecution’s investigations into slush funds have never gone beyond the charging of firm equity holders on grounds of misappropriation. The search for the uses of Hyundai Motor’s slush funds bears meaning in that it paves a way for the repossession of criminal profits.

The stock currently owned by the junior Chung include 6.9 million shares (2%) in Kia Motors, 1.99 million (25%) in Glovis, 2.5 million (25%) in Amco, and 200 thousand (20%) in Autoever Systems Co.

Should any part of the assets, owned by the Chungs, father and son, stem from slush funds, the prosecution plans to confiscate it as part of criminal profits.

The junior Chung will be led to interrogation by prosecutors as early as April 20 or 21, while Chairman Chung, returning from his visit to China today, will be called upon as a suspect anytime next week.

On April 18, the prosecution called for Kim Dong-jin, vice chairman of Hyundai Motors.

The prosecution’s call for vice chairman Kim, one of the closest aides of Chairman Chung, signifies the final procedures of the investigation before summoning the two Chungs, in order to elucidate allegations related to the molding of illegal funds, the illegal succession of business rights, and the clearance of debts.

The prosecution has for the second time decided to file an arrest warrant after conducting additional investigations into Park Sang-bae, ex-vice president of KDB, and Lee Seong-geun, president of KDB Capital, whose warrants were dismissed on Monday after being charged for bribery allegations of being entreated with slush funds for clearing Hyundai subsidiaries of its debts.