Judge Reviews Hyundai Chair’s Warrant

On April 28, Judge Lee Jong-seok at the Seoul Central District Court reviewed a request by prosecutors to issue an arrest warrant for Hyundai Automotive Group Chairman Chung Mong-koo. The request was made on suspicions of creating slush funds.

Lee Dong-yeol, a prosecutor at the Supreme Public Prosecutors’ Office (SPO), attended the review and contended, “Given that Chairman Chung has caused huge losses to the company, a failure to arrest him would give an opportunity for Hyundai executives to destroy evidence, for instance by changing their statements. Chung’s arrest is necessary.”

In defense of their client, Chung’s lawyers argued against an arrest. They said, “There is no way Chung, a chairman of such a large company, would either destroy evidence or run away. Considering the potential impact on the company and the country, an investigation without an arrest is the right way to proceed.”

Chung is accused of having created a slush fund of 130 billion won by embezzling his company’s money since 2001. Involved in the scandal are both the group itself and affiliates of the group, including Glovis, Hyundai Mobis, Kia Motors, Wia and Hyundai Capital.

According to the prosecutors’ request for an arrest warrant, the Hyundai chairman caused a financial loss of 390 billion won to Hyundai Motor and other companies in the group. More specifically, Chung is charged with using the group’s affiliates, including Hyundai Motor, to pay back part of the debts Hyundai Space and Aircraft owes to financial institutions.

In addition, the investigators secured a testimony that over 50 billion won out of the 130 billion illicit funds was spent on managing labor unions. The investigation is still underway to discover the exact amount spent on the union and for what purposes the money was spent.

On April 28, the prosecution announced the launch of a probe into how the details of the warrant were leaked to some media outlets.

Chae Dong-wook, an investigator at the SPO, said, “Even if the investigation is wrapped up, whoever have been involved in the leakage will be discovered and punished.”

Meanwhile, the 11 labor unions in Hyundai Automotive Group demanded punishment by saying, “The details of how the 50 billion won was used, the sum allegedly spent on labor unions by Chairman Chung, must be revealed. And those who are responsible for the expenditure must be put to justice.”

The above demand was made in the statement announced after the Dong-A Ilbo reported that the prosecutors acquired the testimony that Chairman Chung had had a role in the accumulation of the slush fund and spent part of it on the group’s labor unions.

The labor unions continued further by stressing, “No matter what the management says, we are outraged by their thinly veiled attempts to shift the responsibility for the illegally created fund on to the labor. They must clearly disclose every detail about how much was spent where, by whom, and in what way.”

“If all the allegations are found to be true, the company will face the disgrace of having to acknowledge all their wrongdoings concerning its labor-management relationship. The illegal activities will include using managers in order to interfere with elections and votes held among union members,” they added.

The labor unions will reportedly file a lawsuit against Chairman Chung and all other responsible persons on the charge of unfair labor-management practices at the prosecution. Moreover, they will find out about which union members were bribed by the group and take disciplinary action against guilty members.

Lee (46), a labor union member of Hyundai Motors, commented on the matter, “Whenever collective wage negotiations came around, dinner gatherings were frequently arranged by the company. It was even rumored among union members that union leaders receive ‘special’ entertainment. How the 50 billion won was spent must be made clear to everyone.”