Chairman Chey Tae-won Sentenced to Three Years in Prison

Chairman of SK Corporation Chey Tae-won was sentenced to three years in jail Friday. He was prosecuted on charges of directing illegal insider trading and accounting fraud.

This is the first time that a CEO of a corporation has been punished for illegally trading unlisted stocks to strengthen control over a company.

This is expected to have a huge impact on future investigations of the business community and large corporations.

Seoul District Court sentenced Chey Tae-won, previously having been sentenced to 6 years in prison for breach of trust. Son Kil-seung, president of SK Group and president of the Federation of Korean Industries, as well as Kim Seung-jeong, the vice president of SK Global, were both handed suspended 3 year prison terms. They had been prosecuted without detention on the same charges. Kim Chang-keun, president of SK Corp. was given a suspended 2 year sentence. Seoul District Court placed a total of seven executives on probation and fined SK Global 30 million won.

"Chairman Chey Tae-won of SK Group contributed to the nation` economy. But he undermined trust in the market economy and corporate system as he failed to fulfill his responsibilities befitting his wealth. Imprisonment of Chey is inevitable as he ultimately benefited from the crime and the loss triggered by the crime still remains," said Seoul District Court in its verdict.

The court also added, "Even though corporate transparency is directly related to the competitiveness of a company and nation, Chairman Chey Tae-won tried to pass losses of a subsidiary to other subsidiaries thereby causing corporate failure and accounting irregularities."

After the trial, president Son Gil-seung said he would try to normalize the management of the company. He also said he would talk with the management of the company on the decision to appeal.

50 reporters at home and abroad crowded in the courtroom to cover the trial. Chairman Chey Tae-won was arrested March 2003 for incurring losses of 207.1 billion won through insider trading by cross shareholding of stocks of Walker Hill Hotel and by illegal trading SK stocks between SK Group and JP Morgan. He also was charged with accounting fraud worth 1.5 trillion won.

Tae-Hoon Lee jefflee@donga.com