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Korean businessman arrested in growing scandal
January 31, 1997
Web posted at: 1:54 p.m. EST (1854 GMT)SEOUL, South Korea (CNN) -- The head of the embattled Hanbo Group was arrested Friday on charges of bouncing millions of dollars in checks drawn to finance his bankrupt company.
Chung Tae-soo was the first to be arrested in a widening probe into allegations that Hanbo bribed government officials to secure loans for its flagging subsidiary Hanbo Steel Industry Co.
The steel company, South Korea's second-largest, was declared bankrupt on January 23 -- collapsing under a debt of $6 billion. Two other subsidiaries of Hanbo Group, the country's 14th largest conglomerate, have also gone under.
Chung's arrest and the collapse of Hanbo Steel are the latest in a series of financial and political headaches for South Korean President Kim Young-sam.
With the month-long labor strike over and union leaders at least temporarily toning down their demands for a repeal of new labor laws, there were those who thought the worst of South Korea's economic troubles were over. Apparently, they were wrong.
Hanbo's money troubles shake up economy
Hanbo's financial troubles have rocked South Korea's economy, and analysts fear other companies will follow in Hanbo's wake.
"We have a major failure," said economic analyst Eugene Yun. "The financial sector is in turmoil. The money and credit markets are shrinking, and companies are finding it very hard to get financing in the midst of a recessionary climate."
President Kim said through a spokesman that Hanbo Steel should remain operational to prevent further shock to the country's economy, and officials indicated the government would rescue the steel company.
But Kim may have more to fear than economic troubles. Prosecutors are investigating those allegations of bribes and government pressure in Hanbo's acquisition of loans.
Opposition members have claimed such massive loans could not have been made without the government's consent. Strengthening such suspicions is the tainted image of Chung, who has been twice convicted of bribing government officials.
Seoul Bureau Chief Sohn Jie-Ae and Reuters contributed to this report.
Related stories:
- S. Korean police raid bankrupt company offices - January 28, 1997
- Bankruptcy scandal adds to S. Korean government woes - January 27, 1997
- S. Korean opposition rejects offer to debate labor law - January 22, 1997
- S. Korean president to send labor law back to parliament - January 21, 1997
- S. Korean president agrees to meet opposition leaders - January 20, 1997
- Students, police clash violently over S. Korea labor law - January 19, 1997
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