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Last Updated: Monday, 5 February 2007, 07:22 GMT
Hyundai's boss gets three years
Chung Mong-koo (centre) leaves the courtroom after the verdict
Prosecutors had pressed for a six-year sentence for Chung
The chairman of Hyundai Motor Company, one of South Korea's biggest firms, has been sentenced to three years in jail for embezzlement and breach of trust.

Chung Mong-koo, 68, was accused of amassing a multi-million dollar slush fund for personal use and to pay lobbyists and politicians.

A spokesman for South Korea's top auto maker said the ruling was disappointing and that an appeal would be filed.

The court allowed Chung to remain on bail while he fights the appeal.

Before the verdict, analysts said the conviction could harm South Korea's car sector and the wider economy.

'Grave crimes'

Chung was accused of embezzling 103.4bn won ($110m;56m) from company affiliates.

Some of the money was allegedly used to pay off politicians and government officials, and also help smooth the way for Chung's son to take control of the auto group.

This could have a big impact on Hyundai Motor - the impact on the Korean economy could be huge
Kim Hyun-tae, Landmark Investment Management

"The court decided a strict execution of law is necessary to eradicate illegal and anti-market practices in the past and help South Korea build a more advanced economy," Kim Dong-oh, presiding judge at the Seoul court, said.

He said Chung's action's were "clearly criminal".

Prosecutors - who had sought a six-year sentence - had argued during the trial that Chung's crimes were "grave".

But Judge Kim said the lesser sentence was given taking into account Chung's "big contributions to the development of the country's economy" and also his involvement in charity.

Chung's lawyers had argued that the chairman should be granted a suspended sentence because of the damage a jail term might mean to South Korea's economy. They had also cited health reasons.

Chung looked grim as the verdict was read and later walked silently from the courtroom.

He previously asked for leniency and promised to improve the firm's corporate governance.

Hyundai Motor Company said it would appeal.

"We are greatly disappointed by the court ruling today," company spokesman Jake Jang said.

Shares tumble

The trial has been closely watched in South Korea, where it has been seen as a test of the court's commitment to tackle corporate corruption, the BBC's Charles Scanlon in Seoul says.

In the past the courts have treated similar cases with great leniency, but there has been growing pressure from the government and the public to impose stiffer penalties, he adds.

Before the ruling, experts said the conviction could harm South Korea's car sector.

Hyundai factory in Ulsan, South Korea
Hyundai has faced worker unrest

The imprisonment could "have a grave impact on the industry as well as the national economy", said Yong-Dae-in, an analyst with Goodmorning Shinhan Securities.

Shares in Hyundai Motor Company were down 2.44% after the verdict, Reuters news agency reported.

Hyundai - and its affiliate Kia Motors, which is headed by Eui-sun, Mr Chung's son - represent some 70% of South Korea's vehicle exports, making it a vital part of the economy.

Hyundai's leader is the latest Korean boss to be charged

Jail demand for Hyundai chairman
16 Jan 07 |  Business
Currency woes hit Hyundai profits
07 Aug 06 |  Business
Hyundai workers walk out over pay
26 Jun 06 |  Business
Hyundai chairman Chung indicted
16 May 06 |  Business
Hyundai boss arrested in S Korea
28 Apr 06 |  Business

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