Verdicts Send Shock Waves In Korea Inc

Samsung group chairman, Lee Kun-hee, was among nine businessmen found guilty by the Seoul District Criminal Court of bribing former president Roh Tae-woo.

The court handed Lee a two year sentence suspended for three years, meaning he will avoid jail.

But the chairman of the Daewoo group, Kim Woo-choong, the honorary chairman of the Hanbo Group, Chung Tae-soo, and the chairman of the Jinro group, Chang Jin-ho, were each sentenced to two years in jail. The chairman of the Dong-Ah group, Choi Won-suk, was sentenced to a 2-1/2 year term.

We were all shocked after the chairman got a jail sentence. We had expected a suspended jail sentence for him at most, said a Dong-Ah group spokesman. He said Choi had not yet decided whether to appeal.

 

I believe the president will pardon them, said Dongbang Peregrine's head of research, Rhee Namuh. They represent too big a part of the economy. Rhee said he believed the sentences were intended to send a sharp warning to the conglomerates, which ordinary Koreans fear are growing too big and arrogant.

The government is just worried that the conglomerates are now so big and diversified that they can't control them any more. This is one way of reminding the conglomerates who is in charge, he said.

Daewoo would be damaged most if its chairman was jailed, analysts said.

Kim Woo-choong has pretty much run the show himself, while in the other groups the chairman's power is more diluted, said Kim Su Mi, associate director of the Union Bank of Switzerland.

Rhee said Daewoo's aggressive overseas expansion projects would be jeopardised. The company has made huge investments in car plants in the former Eastern Europe. Kim Woo-choong pulled in all these Eastern European deals. There's really no one who could take his place, said Rhee. A Daewoo spokesman said Kim would appeal.

Kim Su Mi said the court had little option but to hand out jail sentences. This is more of a political issue than an economic one. Citizens, especially students, would have been outraged if they got less, she said.

Senior judge Kim Young-il said he had not been swayed by the business power of the tycoons. The heavy sentences are given despite the businessmen's contributions to the national economy and development of their groups, because it should not become a precedent to receive a light sentence because of contributions to the economy, he told a news conference. Prosecutors had demanded heavier jail sentences.

The stock market slumped ahead of the sentencing, though brokers said weak fundamentals rather than the outcome of what has been dubbed the trial of the century were to blame. The composite stock index fell 15.24 points to 766.89, the lowest close since November 4, 1993, when it closed at 766.55.

Yonhap news agency quoted unnamed finance ministry officials as saying they were concerned overseas investors would be scared away by the sentencing. All the businessmen have seven days to appeal their sentences. During that time they remain free. There is an appeal process, and we expect most of them to get suspended sentences at that point, said a Hyundai Securities broker.

The heads of Dongbu group, Daelim Group, the former head of Daewoo Corp and the head of the unlisted Daeho Construction were given suspended jail sentences.