Hyundai Chairman indicted in scam

South Korea: Prosecutors indicted Hyundai Motor Co Chairman, Chung Mong-koo on Tuesday in an embezzlement and slush fund scandal gripping South Korea's largest automaker.

Chung, 68, who has been in custody since his April 28 arrest, was charged with embezzlement and breach of trust, said spokesman for the Supreme Prosecutors' Office, Kang Chan-woo, without disclosing specific amounts of money involved in those charges.

But the official said the tycoon created 103.4 billion won (US$109.5 million; €85.4 million) in slush fund with the embezzled money and that prosecutors were looking into how that secret money was spent.

He didn't say when the first hearing would be held.

At the time of seeking an arrest warrant for Chung, prosecutors said he was suspected of embezzling about 100 billion won (US$106 million; €85 million) in company money to create the slush fund and of breach of trust for allegedly incurring about 300 billion won (US$320 million; €255 million) in damages to the company.

Hyundai offered no official comment on the indictment, but a company official who refused to be named said the automaker hoped Chung would return to management soon.

Chung's son, Eui-son, president of Kia Motors Corp., a Hyundai affiliate, has also been investigated, but wasn't indicted Tuesday. Media reports said prosecutors plan to indict the junior Chung later.

Hyundai is suspected of using the slush fund, via at least two lobbyists, to seek favors from the government.

The lobbyists have been arrested on charges of receiving money from Hyundai in exchange for promises to help it win construction approvals and permits, and other business favors.

It is unclear whether the lobbyists bribed government officials.

Chung's indictment came a day after a former chief of Seoul City Hall's housing bureau was found dead in an apparent suicide amid a probe into suspicions that he might have given Hyundai business favors in exchange for kickbacks.

The body of Park Seok-an, 60, was found in a reservoir outside Seoul and his car on a bridge over the reservoir.

Police believe Park jumped off the bridge.

The motive of Park's act was unclear, but prosecutors had questioned him several times before after finding he bought a Hyundai car at a discount.

The bribery scandal comes as Hyundai and Kia Motors are aggressively expanding operations to achieve their goal of becoming the world's sixth-largest automaker by 2010.

In 2004, the latest year for which statistics are available, Hyundai and Kia ranked seventh in the world in production at 3,168,694 vehicles, according to wardsauto.com.

Hyundai, maker of the Sonata midsize sedan and the luxury Equus, has factories in the United States, China, Turkey and India and plans one in the Czech Republic.

Kia is building a second plant in China and expects its first European factory to start up in Slovakia at the end of the year. It announced last month it would build its first US factory in West Point, Georgia, scheduled to go on line in 2009.

Earlier this month, Hyundai reported a 37.5 percent drop in its first-quarter net profit from a year ago to 318.8 billion won (US$341 million; €270 million).