Accounting & Tax

Korean Court Gives Long Sentences To Five Former Daewoo Executives

19 executives fined almost $20 billion for falsifying accounts.
CFO.com StaffJuly 25, 2001

A Korean court sentenced former Daewoo Group officials to prison terms and levied fines of nearly $20 billion for falsifying financial accounts, according to the Wall Street Journal.

The fines were the largest ever levied by a South Korean court, and prosecuting attorneys said the ruling signified the government’s commitment to cleaning up the nation’s corporate practices, says the Journal. Many in Seoul said, however, that the case couldn’t be closed without the apprehension of the group’s founder, Kim Woo Choong, who fled the country in December 1999.

On Tuesday, the Seoul District Court found 19 former Daewoo Group executives guilty of distorting financial records and using falsified financial documents to procure funds for their companies, says the Journal. The 19 executives were fined a combined total of nearly $20 billion, with five of them being sentenced to prison, according to a court official. The court declined to give a breakdown of how much each individual was fined, nor did it disclose the amount that was falsified, says the Journal.

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Those sentenced to terms of three to seven years included two former chairmen of trading firm Daewoo Corp., a former Daewoo Motor Co. chairman, and a former chairman of Daewoo Electronics Co., says the Journal.

Daewoo Group was once South Korea’s second-largest conglomerate, before collapsing in July 1999 under the weight of 89 trillion won ($67.94 billion) in liabilities. The group’s 64-year-old founder and chairman, Kim, had been revered as the man who built a small textile- trading company into a global conglomerate with automobile and construction interests in the Middle East, Europe, and Africa. Kim has been on the run from Seoul prosecutors, who allege that he masterminded Asia’s largest-ever case of fraud — falsifying the financial statements of 12 companies, including Daewoo Motor.

Kim has been spotted in Sudan and France in the past year and continues to be the target of an international manhunt.

Critics in Seoul charge that Tuesday’s ruling was unfair and that President Kim Dae Jung’s government was scapegoating these former executives in the absence of Kim Woo Choong, reports the Journal. Many in the South Korean public believe Kim was the mastermind behind the fraud case, and Daewoo Group executives said Tuesday at the court hearing that they were “only following orders” from Kim. The officials are entitled to appeal.

Bringing Kim to court is seen as a politically risky move for the government, however, as the tycoon was known to have close ties with many senior government officials, says the Journal. Kim was convicted in the mid-1990s of paying kickbacks to government officials to secure lucrative contracts for his companies.

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