The chairman of Hyundai Motor Group, the sixth-largest carmaker in the world, was sentenced yesterday to three years in jail after being convicted of embezzlement and breach of trust.

Chung Mong Koo, the son of the Hyundai founder, was found by a judge to have “greatly undermined the transparency and soundness of business management” and to have “had many adverse effects on business culture”.

He had been accused of amassing a multimillion-pound slush fund for personal use and to pay lobbyists and politicians.

Industry observers raised doubts yesterday that the powerful tycoon would see the inside of a cell, after he was released on bail pending an appeal against the sentence.

The 68-year-old chairman appeared to be stunned after he heard his punishment. Most pundits had expected him to receive a suspended sentence. Hyundai Motor, South Korea’s second-biggest chaebol, or family-run conglomerate, after the Samsung Group, said that Chung would keep working at the company and appeal.

“It is definitely a setback and we are greatly disappointed, but there is an appeal and we remain hopeful,” Oles Gadacz, a Hyundai spokesman, said. “But he is out on bail and attending to his duties, so it is business as usual.”

Chung was accused of embezzling 103.4 billion won (£56 million) from company affiliates. He was detained last April before being granted bail in June. During his absence his group appeared to be rudderless. Overseas plants were delayed, the company was plagued by strikes and net profits fell by 34 per cent.

Chung is only the latest in a long line of Korean conglomerate chiefs to fall foul of the law. However, Korean courts are usually lenient towards the heads of successful chaebols because lobby groups and the conservative press emphasise their contributions to the economy. The Justice Ministry is considering a controversial amnesty for convicted business-men and a decision is expected next month. Hyundai stock recovered from early selloffs yesterday and closed unchanged. Domestic market-watchers were unfazed. “This is absolutely not serious,” an automotive sector analyst said on condition of anonymity. Foreign observers based in South Korea agreed. “I have seen people associated with the company and they think it very unlikely that the chairman will be doing any ‘slammer time’,” Hank Morris, a director at the consultancy IRC Ltd, said.

Chung’s sentence came amid reports that he had received a dividend payment of 22.3 billion won, the highest in the country for last year.

Leading men

Other chaebol chairmen implicated in dodgy deals

1997: Chung Tae Soo, of Hanbo, sentenced to 15 years’ jail for bribery

2003: Chung Mong Hun, of Hyundai Asan, kills himself awaiting trial

2004: Chey Tae Won, of SK Group, freed after seven months in jail over billion-dollar accounting scandal

2006: Lee Kun Hee, of Samsung, apologises for corporate misgovernance and alleged bribery by making big charity donation

2006: Kim Woo Choong, founder of Daewoo, receives ten-year jail term for fraud

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