A prominent academic reckons the South Korean government may finally be getting tough on corrupt family businesses.
Kim Woo-chan, a professor at Korea University Business School, says the imprisonment last week of Chey Tae-won, head of SK Group, may signal a sea change for how top family conglomerates – or chaebols, as they are known locally – are allowed to operate in South Korea.
Chey, second-generation chairman of South Korea’s third largest chaebol, SK Group, was sentenced to four years in prison for embezzlement on 31 January. The 53-year-old, who is married to the daughter of former president Roh Tae-woo, was adjudged to have funneled 49.7 billion South Korean won (€33.7 million) of company money into personal investments. He was sent to prison directly from a Seoul courtroom.
“These events indicate that the courts will be tougher on corporate criminals,” Professor Kim told CampdenFB. “Note that politicians, both liberals and conservatives, promised to come up with measures that can restrict lenient verdicts during last year elections.“
Chey’s immediate four-year sentence is seen as a landmark ruling for South Korean courts, where judges are known for treating white-collar criminals with undue leniency. Previously, courts cited “contributions to economic development” as a mitigating factor in sentencing top chaebol businessmen, consequently alloting suspended sentences so that those convicted could avoid serving time.
The length of Chey’s sentence, however, means he will not be entitled to the possibility of a suspended sentence.
Kim, a former committee member at SK Group, said: “In the past, corporate criminals were sentenced to three years of imprisonment … three years is the maximum imprisonment sentence eligible for suspension. Also, before the expiration of such suspension, presidents regularly gave pardons and reinstatements that completely wiped out even the conviction records.”
In 2012, however, harsher sentences were finally passed on South Korea’s top tycoons.
In August, Kim Seung-youn, the chief executive of Hanwha – a conglomerate with holdings stretching from explosives to financial services – was also found guilty of appropriating company funds for his own personal investments.
The 63-year-old, who had previously been pardoned for crimes as diverse as hitting a man with a steel pipe in a bar brawl to illegally funding a political campaign, is now serving four years' imprisonment for embezzlement charges. Like Chey, he was given an unsuspended sentence.
There remains a concern, however, that these latest sentences are merely “slap-on-the-wrist” measures, where harsher penalties are actually required.
Kim told CampdenFB: “Given that the two chaebol chairmen had previous convictions, there is criticism that the sentences are still lenient. According to the press release by Solidarity for Economic Reform, a prominent civil society organisation and a watch dog of chaebols, embezzlement cases in excess of 30 billion won are subject to an imprisonment of five to eight years.”
By that logic, Tae-won’s sentence of four years is unlawfully short.
Based on the value of their assets SK Group is the third largest corporation in South Korea, after Samsung and Hyundai. The group is composed of 92 subsidiaries variously operating in energy, telecoms and other industries.
In 2012, Forbes placed Chey as South Korea’s 11th richest man, with a net worth of over $1.9 billion (€1.4 billion).
Read Issue 56 of CampdenFB for more information on South Korean's powerful business families.