'Embezzlement and Breach of Trust'—Hyun-Bum Cho, Chairman of Hankook & Company, Has Prison Term Reduced to Two Years on Appeal

[Financial News] Hyun-Bum Cho, Chairman of Hankook & Company Group, who was sentenced to three years in prison in the first trial for embezzlement and breach of trust, had his sentence reduced to two years on appeal. However, the appellate court did not grant a suspended sentence, maintaining the actual prison term.
On the 22nd, the 13th Criminal Division of the Seoul High Court, presided over by Judge Baek Kang-jin, overturned the original three-year sentence for violating the Act on the Aggravated Punishment of Specific Economic Crimes (embezzlement and breach of trust) and sentenced Chairman Cho to two years in prison.
The appellate court acquitted Cho of the charge related to a private loan to a company operated by an acquaintance, which had been found guilty in the first trial. The key issue was whether Cho caused financial harm to the company by lending 5 billion KRW to Rihan, an affiliate of Hyundai Motor Company run by an acquaintance, without securing sufficient collateral.
The first trial ruled that the right of first refusal to purchase the Hwaseong plant site, in case Rihan failed to repay the loan, could not be considered adequate collateral. However, the appellate court took a different view. The court noted that the plant site was valued at around 20 billion KRW, and even after subtracting a 10 billion KRW senior lien, collateral worth about 10 billion KRW remained. Therefore, the court concluded that the loan to Rihan could be seen as a matter of business judgment.
However, the court upheld the original verdict regarding other charges, such as the personal use of a corporate credit card. The court pointed out that Cho had a prior criminal record and committed further offenses even while on trial and during a suspended sentence period, stating, "What meaning does a court ruling have if such behavior continues? Strict punishment is unavoidable."
Cho's legal team argued for his prompt return to management, but the court rejected this. The court stated, "Allowing an executive who pursued personal gain to return would negatively impact corporate culture and sustainability. Even considering the circumstances raised by the defense, a suspended sentence is inappropriate."
Wearing a green prison uniform, Cho stood silently as the verdict was read and then left the courtroom. Hankook & Company expressed, "We are bewildered by this unexpected outcome" and added, "We are carefully reviewing our response going forward."
As the head of the Hankook Tire Group, Cho faced allegations of providing improper support to an affiliate, Hankook Precision Works (formerly MKT), by purchasing tire molds at prices higher than those offered by competitors between 2014 and 2017. He was also accused of lending 5 billion KRW of company funds to Rihan, run by an acquaintance, without taking appropriate measures to recover the debt.
The first trial found Cho guilty of lending 5 billion KRW to Rihan and of some personal use of the corporate credit card, but acquitted him of the MKT improper support charge and some charges of bribery and breach of trust.
scottchoi15@fnnews.com Choi Eun-sol Reporter