Hyundai chief admits fraud

The chairman of Hyundai admitted to his role in setting up slush funds allegedly used to bribe politicians as the scandal surrounding the South Korean car maker claimed more victims.

“I admit my guilt, to a certain extent,” said Chung Mong-koo during his second appearance at his embezzlement trial.

However he was unable to help prosecutors further, replying to several detailed questions about the fund by claiming, “I don’t remember.”

Mr Chung is officially charged with breach of trust and embezzling almost $110m (£60m) of company funds, while deliberately incurring losses at group companies by forcing them to support weaker affiliates. He faces a life sentence behind bars.

The 68-year-old entered the courtroom in a wheelchair, telling the judge he was suffering from high blood pressure, joint pains and occasional dizziness.

The trial has put the spotlight on attempts to reform South Korea’s powerful “chaebol”, the family-run conglomerates that helped rebuild the economy after the 1950-53 Korean War but were partly blamed for the financial crisis of the late 1990s.

During his first court appearance earlier this month, Mr Chung apologised for wrongdoings he blamed on his drive to create a global car firm. Prosecutors have opposed his request for bail.

Analysts and company insiders say the charismatic chairman used to have a hand in almost every decision at the auto group and some analysts worry a lack of direction at the top could dent Hyundai’s plan to become a top five car maker by 2010.

Since the scandal broke, Hyundai has delayed building a $1.3bn car factory in the Czech Republic, while its Kia subsidiary also postponed construction of its first US plant.

Mr Chung’s admission came as prosecutors indicted Hyundai Motor vice chairman Kim Dong-jin and three other Hyundai Motor group senior executives.

They also detained former finance ministry official Byeon Yang Ho over his role in the bribery scandal. He is alleged to have been paid money from the slush fund.

Investigations into Hyundai Motor’s corruption and bribery scandal have so far landed five people in jail, including the chairman of the Seoul-base car maker, a former vice governor of Korea Development Bank and the head of one of its subsidiaries.

Last month, another former government official was found dead after becoming the focus of an investigation that some observers believe could spread to the entire Korean financial services industry.

Probes into Hyundai and Kia have led to arrests and a $1.1bn donation by the Chung family of their stakes in Glovis. Prosecutors banned 10 executives from travelling, stalling plans to open overseas factories.

Mr Chung, head of South Korea’s third-wealthiest family, has been in jail since April.