South Korea’s Enron

Jocelyn Ford May 30, 2006

SCOTT JAGOW: The crackdown on corporate fraud we’ve seen in this country is also happening in other parts of the world. Case in point: South Korea. Last month, the chairman of Hyundai was charged with bribery and embezzlement. Today, a court sentenced the founder of Daewoo to 10 years in prison for fraud. Daewoo made everything from semiconductors to submarines, but it doesn’t exist anymore. It collapsed, like Enron. More now from Jocelyn Ford.

JOCELYN FORD: Nine years ago, Daewoo was South Korea’s second-largest conglomerate with 300,000 employees. Then came the 1997 Asian financial crisis. Daewoo went bankrupt and was broken up. Chairman Kim Woo-jong escaped to France.

Last year the 69-year-old returned to Seoul to face charges including embezzlement and illegal financing. His defense argued the judge should go easy because Kim helped build South Korea’s economy. But the plea fell on deaf ears.

Lee Jisoo is an analyst at the Center for Good Corporate Governance.

LEE JISOO: Previously the court was very lenient on white collar crimes, but it’s not going to be like that any longer.

Lee says this is the harshest sentence ever handed to a prominent business leader. Before corporate honchos could expect protection from their buddies in politics and the courts, but now Seoul wants its companies to get in line with global rules.

I’m Jocelyn Ford for Marketplace.

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