Probe Focuses on Slush Fund Purchases

“More Than 50 Billion Won was Used for Managing the Labor Union”-

Investigation into how Hyundai Automotive Group used its slush funds has yet to be conducted fully. But the prosecution reportedly obtained a statement which indicates that a considerable amount of slush funds was used for managing the labor union.

That was also mentioned in examination of the warrant against Chung Mong-koo, chairman of the group, yesterday.

Chung reportedly said in the questioning by his counsel, “As there are many labor unions in affiliates of Hyundai Automotive Group, we spent a lot of money on managing the unions. It is called slush funds, but the most of the money was used for managing the companies.”

The prosecutors’ office believes that the group’s slush funds were mainly used to resolve the labor strike and collective negotiations on wage.

It thinks that the money was used towards the prevention of a staging of a strike or to treat the unions so that they would wrap up a strike sooner.

Hyundai Automotive Group appears to have also used the slush funds in the process of conducting collective negotiations on wage with the unions.

The prosecution believes that the group offered money before negotiations in the name of “encouragement money” or “payment for dining,” so that the group could get a favorable conclusion from the negotiations.

Reportedly, more than 50 billion won out of some 130 billion won was spent on managing labor unions. Moreover, the amount could increase if investigations into where the slush fund has been spent began in full swing. Also, the investigation is expected to reveal details of the union management expenses.

Slush Funds Might Have Been Used as Illegal Election Campaign Funds or Lobby Money-

The prosecutors’ office found that about 17 billion won out of 48 billion won, which the Hyundai Automotive Group generated in 2002, was used from August to December, a time period that precedes the presidential election.

Considering that a large amount of slush funds was used just before the presidential election, the prosecution believes that the money might have gone to ruling and opposition presidential candidates at the time.

Hyundai Automotive Group was involved in the investigation into the illegal election campaign fund in 2003 and 2004. At that time, it was found that the group used slush funds of its affiliate, Hyundai Capital, as illegal presidential election campaign funds. The prosecution concluded in announcement of the investigation results in May 2004 that two billion won out of 10 billion won, which the group provided to the Grand National Party as election campaign funds, were Hyundai Capital’s slush funds, and that the remaining eight billion won was personal money which the late Honorary Chairman Chung Joo-young bequeathed.

Although the prosecutors’ office is probing into the group’s senior executives involved in generation and use of the slush funds on whether the money was spent in lobbying or illegal political donations, it has yet to obtain statements related to that.

It attempted for a behind-the-scenes negotiation with the group to find about the use of slush funds in lobbying on April 26 when it decided to seek an arrest warrant against the group’s chairman. However, although it tried late into the night, it appears to have failed to uncover details of the use of the money.

Under these circumstances, it is expected that the results of the investigation into the use of the money which will start in full swing next month will reveal whether the group’s slush funds were spent as lobbying money or illegal political donations related to presidential, general and local elections.

Tae-Hoon Lee jefflee@donga.com