In Korea, Getting Out of Jail Costs Money

The suspension of a three-year prison sentence for Hyundai Motor Group Chairman Chung Mong Koo, convicted of embezzlement in February, if he donates $1 billion to charity, is the latest and most dramatic example of a uniquely Korean form of justice.

Chung isn’t the first to escape jail by delivering large sums of money to a variety of causes that “aid society,” and he probably won’t be the last. They survive, usually after making some gesture towards harmony and reminding the court of the contribution their conglomerates make to the Korean economy.

The embezzlement and breach of duty charges were upheld against Chung and could have earned him a full six years in prison, but he was allowed to go free on the promise of restitution, to be paid by building a concert hall and opera house in Seoul and 12 cultural centers in other provinces over the next seven years.

“Sending Chung to prison is not necessarily the best solution. He must be ordered to pay for the wrongdoings he actually committed,” presiding Judge Lee Jae-hong ruled. “If the ruling is criticized for showing leniency to white-collar crime, I will accept it.”

Contrast that to Conrad Black, the Canadian-born press baron who gave up his citizenship in 2001 to accept a life peerage from Queen Elizabeth as Baron Black of Crossharbour. Lord Black faces 35 years in prison and a fine of $1 million as a result of charges in US District Court of mail fraud and obstruction of justice. Sentencing is scheduled for November. While his Canadian lawyer says an appeal will be filed, nobody has stepped forward to say that if he just gives up a bundle of the money he lifted from Hollinger*, all will be forgiven.

What about ex-WorldCom chief executive Bernie Ebbers, he of the $80,000 shower curtain, who was sentenced in 2005 to 25 years in prison on charges of orchestrating what was called the biggest corporate fraud in US history? Nobody said, “Well, Bernie, a little grease in the wheels of orphanages would put everything right.” Enron, Adelphia and a flock of other corporate disasters? Ken Lay, the CEO of Enron, died before he could be sent to jail, although he was widely known as a beneficent funder of all things cultural in his native Texas, which god knows could use some enlightenment.

Throughout Southeast Asia, of course, by and large nobody has to come up with any restitution for anything. The Indonesian mud flow disaster, which has destroyed the ecology of a corner of East Java, continues to wreak havoc. The Bakrie family, despite widespread allegations of corporate incompetence in drilling the gas well that kicked it off, have not only evaded prosecution but the patriarch remains in the cabinet of President Susilo Bambang Yudhoyono.

In Malaysia, tycoon Eric Chia, despite indications that he had embezzled a portion of the $800 million lost in the Perwaja Steel scandal, left the court a free man when the judge simply decided that the prosecution had no case.

In Thailand, of course, the military continues to pursue former Prime Minister Thaksin Shinawatra, although that appears to be for political rather than business reasons. In the Philippines, Imelda Marcos remains a glamorous celebrity icon despite allegations that she and her late husband, Ferdinand, may have stolen as much as $30 billion. Suharto, the strongman who looted Indonesia for 32 years, continues to receive visitors and supplicants, except when his stroke starts to act up, usually when the government makes prosecutorial noises. In China, the authorities tend to shoot embezzlers, although only if they end up on the wrong side of the political fence.

So Korea looks pretty good. Chung is Korea’s second-richest man and heads a company, Hyundai, which appeared to be sliding toward the tank until the court freed him, according to Bloomberg, to give him “more time to concentrate on winning customers from Toyota Motor Corp. and Honda Motor Co.” Hyundai Motor earlier this week cut its 2007 sales target in China and the U.S., citing tougher competition and slowing demand. The appeal court ruled that his imprisonment would badly damage South Korea's economy, so it was better to turn him loose.

Certainly, Hyundai and its sister company, Kia Motors Corp, have had their problems. Overseas construction of new plants has been delayed, along with the introduction of new models, although that could well be due to increased competition for a brand that has not always met the favor of consumer advocates.

Chung and three other Hyundai Motor executives were accused of setting aside 103.4 billion won without proper accounting and of using 69.6 billion won for illegal political donations, undeclared employee bonuses and to attract an international expo to the city of Yeosu. There were also charges of manipulating share prices of an affiliate to benefit the Chung family, which founded the conglomerate. He was found guilty of all charges, and the court upheld the verdict, minus any jail time.

"We are greatly relieved that this matter is finally over," Hyundai said in a statement. "We can now devote our full energies to addressing the numerous challenges that face us and building a global brand. We look forward to honoring our commitments made earlier to expanding our corporate social responsibility, the funding of charitable causes and improving management transparency."

Will Hyundai and the Chung family be in the news again?

In 1978, he and his late father, the founder of Hyundai, were cleared after an investigation into corrupt property deals. Chung Mong-koo was jailed for 75 days over construction regulations infringements, but freed on a 5 million won ($5,334) fine.

In 2003, Chung Mong-hun, Chung Mong-koo's younger brother and then-chairman of Hyundai Asan, committed suicide as he faced trial over an alleged $500 million secret "cash for summit" payment to Pyongyang before the landmark June 2000 Inter-Korean summit. He was also accused of doctoring company books and embezzling 15 billion won.

In 2004, Hyundai Motor Group vice chairman Kim Dong-jin and Korean Air Chief Executive Cho Yang-ho were given suspended two-year and one-year jail terms respectively, for raising a slush fund to support politicians in the 2002 presidential race. Both kept their jobs.

In 2006, prosecutors raided Hyundai Motor and Kia Motors over a probe into suspected illegal political lobbying.

Just today, anti-trust regulators fined Hyundai and several affiliates for engaging in sweetheart deals that stifle competition and unfairly reward members of the group.

Korea’s charities and cultural organizations might find it profitable to keep an eye on the company. There could be more donations somewhere down the road.

*We originally said Halliburton. We apologize.