http://www.koreatimes.co.kr/www/news/biz/2012/02/123_104180.html
Hanwha avoids delisting, but unruly boss could be its ruin
By Kim Tong-hyung
The widening fraud and embezzlement scandal surrounding Hanwha Chairman Kim Seung-youn further disgraces the legacy of one of Korea’s richest men and touches off questions on whether his waywardness is beginning to take a toll on the company. / Korea Times file
Hanwha, one of the country’s top-10 business groups, breathed a sigh of relief Sunday after the Korea Exchange opted not to delist the group’s holding company in a much-anticipated decision, despite Kim potentially facing a lengthy prison term over widening fraud and embezzlement charges. However, the damage to the confidence in the conglomerate’s future could be irreversible.
Kim, who recently turned 60, was indicted last year for unlawfully breaching Hanwha’s corporate coffers to plug losses from a number of ill-advised business projects he had been running personally on the side. The Seoul Western District Prosecutors’ Office last week said it would demand a nine-year jail term for Kim atop of a 150 billion won (about $134 million) fine.
The murky allegations surrounding Kim come at a time when the families behind the country’s chaebol, or family-owned conglomerates, are facing increasing scrutiny for abusing corporate wealth as politicians move faster to massage voters’ egos as poll days near.
Kim has been denying the charges against him, but not many seem willing to grant him the benefit of the doubt when he has more baggage than an airport terminal. And as rich as he is, he won’t be able to pay enough goons to find and assault every critic.
“Until now, prosecutors have been politically prevented from properly punishing wrongdoings of chaebol chairmen. As in tough times, they would say we are making it worse, and in good times, they would say we are spoiling the mood,’’ a senior prosecution official told reporters.
“If we continue to make excuses to let chaebol leaders find an easy way out, this country has no future.’’
Korea certainly has developed a reputation for employing lax justice on chaebol leaders. Samsung Electronics Chairman Lee Kun-hee, Hyundai Automotive Chairman Chung Mong-koo and SK Chairman Chey Tae-won are among the corporate bigwigs pardoned in recent years for a broad range of crimes that include illegal wealth transfers, tax evasion, bribing and embezzlement.
However, the leash apparently isn’t long enough for some tycoons like Hanwha’s Kim and SK’s Chey, back on the grill for allegedly abusing corporate wealth to soften personal losses from futures investment, a duo leading a list of CEOs who appear to have blown their second chances or even their third.
Interestingly, Hanwha and SK both have a lot in common in terms of where they are as a business group. They both benefited from their strength in the domestic market, with Hanwha excelling in chemicals, explosives and financial services and SK dominating the telecommunications and energy sector.
Despite this, the companies have been struggling mightily to rebuild themselves on the global scale and the dual reputation of their leaders as successful businessmen and troublemakers certainly doesn’t help.
Since succeeding his late father, Kim Chong-hee, at the helm of Hanwha in 1981, Kim has developed a character that is more frequently compared to Don Corelone than Jack Welch.
In 1993, Kim became the first leader of a top-10 business group ever to be arrested after prosecutors charged him for smuggling dollars to help purchase a lavish mansion in Los Angeles.
Kim was also questioned by prosecutors during an investigation of Hanwha between 2004 and 2005 over suspicions that he created a slush fund of about 9 billion won and used the money to bribe politicians ahead of the group’s acquisition of Korea Life Insurance in 2002.
Kim’s most famous dust off with the law came in 2007 when he had his bodyguards kidnap and beat up some bar workers who had attacked his son, and at the heat of the moment, assaulting one of the victims himself with a metal pipe. He was convicted for the incident but was pardoned by President Lee Myung-bak the following year.
The current investigation on Kim is based on allegations that he spent hundreds of billions of won in company funds from 2004 to 2006 to repay hidden private business debts. Prosecutors since last year have been tracing the money flowing in and out of some borrowed-name bank accounts Kim has been controlling.
The investigation is a public relations disaster for Hanwha and could end up hurting the firm. The conglomerate has been scrambling to secure revenue sources aside from its bread-and-butter businesses in chemicals and explosives. Its attempt to acquire a controlling stake in Daewoo Shipbuilding & Marine Engineering fell through in 2009.