SK Owner Choi and Executives Charged with Breach of Trust

SK Corporation CEO Choi Tae-won and SK Executive Director Kim Chang-kun were indicted without bail on charges of aggravated embezzlement, announced Criminal Division 9 of the Seoul Public Prosecutors` Office yesterday. The DA`s Office has investigated the SK Group`s alleged illegal internal transaction and accounting practices.

Also indicted on bail are eight SK directors including Son Seung-gil, who chairs the Federation of Korean Industries, SK Global CEO Kim Seung-chung, Yoo Seung-yul, and SK C&C President Yoon Suk-kyung. SK Global, Inc. was indicted as well.

According to the multi-count indictment, Choi had SK Global`s books altered when making its 2001 closing report last January. That way, says the prosecution, the company could put off bank loans amounting to nearly 1.2 trillion won (approximately $1 billion), and bloated its sales volume by 150 billion won.

Choi and his henchmen are also suspected of causing SK C&C and SK Global to sustain a loss of 207.1 billion won by cutting a secret deal concerning SK Securities` shares and making illegal donations of Walker Hill Hotel shares.

The DA`s Office explains that the SK Group itself has engaged in illegal accounting practices for fear of SK Global`s insolvency and ensuing damage to the reputation of the Group itself.

To determine whether SK Global fraudulently obtained loans through false accounting, the prosecution has decided to ask the Financial Supervisory Service to conduct a formal certified audit. The FSS will also report the accounting firm with the initial “Y” in its name to the service. They are suspected of having cooperated with SK Global in making the faulty financial claims. Once the results come out, the DA`s Office will determine whether it will file criminal charges against the firm.

The DA`s Office also indicted SK Global for making a false overseas deposit of 1,000 of its shares, violating the Anti-Trust and Fair Trade Act.

Sang-Rok Lee myzodan@donga.com