hankyoreh

SK chairman Chey Tae-won

By Kim Tae-gyu, staff reporter

SK Group chairman Chey Tae-won was sentenced to four years in prison for embezzlement on Jan. 31.

Chey, 53, was taken into court custody following the verdict. He had been indicted without detention for violating the Act on the Aggravated Punishment etc. of Specific Economic Crimes by using tens of millions of dollars of his company’s money for his own futures investments.

SK Group is South Korea’s third-largest chaebol. It is composed of 92 subsidiaries and affiliates. Chey is the son of the late Chey John-hyun, who found SK Group (originally known of Sunkyoung Group) in 1953.

The court also handed down a not-guilty verdict for vice chairman Chey Jae-won, 50, judging the chairman, his brother, to be responsible for the 48.5 billion won (US$44.6 million) that prosecutors had indicted him for allegedly embezzling on his own.

The 21st criminal consensus division of Seoul Central District Court, headed by judge Lee Won-beom, found Chey Tae-won guilty of embezzling an investment of 46.5 billion won (US$42.7 million) in the venture capital fund Benex by an SK affiliate.

However, it acquitted Chey Jae-won, judging there to be insufficient evidence that he contributed substantively to the crime. The younger Chey had been indicted for conspiring with his brother to embezzle the first 46.5 billion won, and for embezzling of a second SK affiliate investment of 48.5 billion won to make up for it.

Chey Tae-won’s placement in court custody was taken as a sign that the court does not intend to go easy on chaebol heads accused of committing economic crimes.

Indeed, the last year has seen a marked shift in court practices on detaining chaebol chairmen. Taekwang Group chairman Lee Ho-jin, 51, was placed in court custody in February of last year, followed by Hanwha Group chairman Kim Seung-youn, 61, in August.

Previously, courts tended to give chaebol heads suspended sentences on the basis of their “contributions to economic development.”

Lee Won-beom, the judge who delivered the verdict, stressed that he did not intend to take the defendant’s status as a chaebol chairman into account.

“I don’t think it’s right for the chaebol abusive practices to affect the sentence in a negative way. At the same time I am also opposed to lessening the sentence out of consideration for chaebols’ contribution to the national economy,” said the 48-year-old judge.

On the decision to put Chey into custody, Lee said, “Previous Supreme Court rulings state that, absent any special circumstances, defendants should be taken into court custody when sentenced to jail time. I don’t see any special circumstances here that would warrant granting an exception.”

In the past, the typical court sentence for a chaebol chairman convicted of embezzlement or breach of trust was three years in prison suspended for five years. Because the criminal code only permits suspended sentences when the prison sentence is three years or less, judges took it upon themselves to give a sentence of half the maximum so that a suspended sentence could be given.

This practice helped Samsung Group chairman Lee Kun-hee, 71, avoid jail time when he was given a three-year sentence suspended for five years after being convicted of breach of trust and tax evasion in August 2009. Hyundai Motor Group chairman Chung Mong-koo, 75, also avoided serving time when he received the same sentence in June 2008 after an embezzlement conviction.

Indeed, Chey Tae-won himself was given the exact same sentence in May 2008 for SK Global accounting fraud amounting to over 1.5 trillion won (US$1.4 billion). Three months later, he was handed one of the full pardons traditionally granted by the President on Independence Day.

In response to a growing public outcry against the “slap-on-the-wrist” sentences, the Supreme Court’s Sentencing Commission took action in July 2009 by setting sentencing guidelines according to the amount involved in embezzlement or breach of trust cases, arguing that the public’s calls had to be answered with appropriate sentences for serious white-collar crime. In particular, it required sentences of four years or more in cases where the value was 5 billion won (US$4.6 million) or greater, effectively barring the issuing of suspended sentences in those instances.

Chey’s detention suggests that the judiciary’s hard line on chaebol corruption is likely to continue. The court’s approach may also be influenced by President-elect Park Geun-hye’s emphasis on “economic democracy” in her election campaign and the broad-based public sympathies behind it.

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