South Korea Hyundai Trial
Lee Jin-man  /  AP
Hyundai Motor Co. Chairman Chung Mong-koo arrives for his trial at the Seoul High Court in Seoul, South Korea, Thursday.
updated 9/6/2007 9:33:59 AM ET 2007-09-06T13:33:59

An appeals court suspended a three-year prison sentence for Hyundai Motor Co. Chairman Chung Mong-koo on Thursday, saying the tycoon is too important to South Korea’s economy to go to jail for embezzlement.

A three-judge panel at the Seoul High Court suspended the sentence for five years, meaning that the 69-year-old head of the nation’s biggest automaker will avoid prison as long as he keeps a clean record during that period.

A lower court had sentenced Chung in February to three years for embezzling more than $100 million from the company to set up a slush fund. Prosecutors say the fund was used to pay lobbyists to gain government favors and for personal use.

Presiding Judge Lee Jae-hong told the packed courtroom that Hyundai Motor has great influence over the nation’s economy and Chung, its hands-on leader, is the symbol of the company.

“I am also a citizen of the Republic of Korea,” Lee said. “I was unwilling to engage in a gamble that would put the nation’s economy at risk.”

Chung, free on bail after spending two months in jail after his arrest in April last year, has been actively running the company, which ranks as the sixth-largest automaker in the world and has ambitions to become the CEOfifth-largest automaker by 2010.

Lee said he struggled with the decision, originally set for July 10, and postponed it twice, saying the court needed more time. He said he sought the views of various people, including other judges, prosecutors, lawyers, journalists and “even taxi drivers and restaurant employees.”

In his appeal, Chung asked the court to be allowed to avoid prison to devote his energies to South Korea’s biggest automaker to contribute to the country’s economy.

Prosecutors sought a six-year prison term, saying the original decision was not harsh enough for the crime.

The court also ordered Chung to fulfill a promise he made last year to donate 1 trillion won ($1.1 billion) of his personal assets to society and told him to do community service.

It was not immediately clear whether prosecutors planned to appeal to the Supreme Court. A lawyer for Chung said earlier Thursday that the top court only hears cases involving guilt or innocence, suggesting that an appeal regarding the sentencing would be unlikely.

Kim Kyung-soo, a spokesman for the Supreme Public Prosecutors’ Office, said Chung’s conviction stands.

“It’s not that he was found innocent,” Kim said. “Therefore, it is not appropriate for us to comment on the weight of the sentence.”

But Park Wan-gi, an activist with the Citizens’ Coalition for Economic Justice, denounced the ruling, saying it reinforced the perception that the rich can avoid jail.

In a similar case, the Seoul High Court in 2005 suspended a three-year prison term for accounting irregularities handed to Chey Tae-won, CEO and chairman of South Korea’s leading oil refiner, SK Corp., now SK Energy.

Chung has pushed Hyundai Motor to expand aggressively overseas, building factories in China, India, Turkey and the United States, with another one currently under construction in the Czech Republic.

Hyundai Motor affiliate Kia Motors Corp. has done the same, manufacturing cars in China and Slovakia and building another plant in the U.S. state of Georgia, near Hyundai Motor’s factory in Alabama.

Last year, Hyundai and Kia accounted for about 72 percent of South Korea’s automobile exports. Autos account for 13 percent of the country’s total exports.

Hyundai welcomed the decision.

“We can now devote our full energies to addressing the numerous challenges that face us and building a global brand,” it said in a statement.

Analysts say Hyundai faces problems including softer sales in the United States and China and further mending troubled relations with its strike-prone labor union.

A new wage deal Hyundai struck with its unionized workers this week was a positive development but “more work needs to be done to be able to wipe rocky labor-management relations off Hyundai’s list of risk factors,” said Chung Sung-yob, an analyst at Daiwa Securities Korea.

The deal, if approval by the union rank-and-file, would mark the first time in a decade that Hyundai has averted a strike over annual salary negotiations.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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