Former Hi-Mart Chairman Seon Jong-gu Sentenced to Prison for Embezzlement and Breach of Trust Amounting to Hundreds of Billions

Seon Jong-gu, Former Chairman of Hi-Mart

[Asia Economy Reporter Kim Daehyun] Former Hi-Mart Chairman Sun Jong-gu, who was convicted of causing thousands of billions of won in damages to the company during the sale process of Hi-Mart, has been sentenced to 5 years in prison by the Supreme Court.

On the 31st, the Supreme Court's 2nd Division (Presiding Justice Lee Dong-won) upheld the lower court's ruling sentencing former Chairman Sun to 5 years in prison and a fine of 30 billion won on charges including embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes. The court stated, "The lower court did not err in its legal interpretation regarding breach of duty under the Act on the Aggravated Punishment of Specific Economic Crimes, the occurrence of damages, and the calculation of the amount of property gains and losses."

Earlier, former Chairman Sun was prosecuted on charges of causing the special purpose company (SPC) Hi-Mart Holdings to borrow acquisition funds during the sale of Hi-Mart to the private equity fund AEP (Affinity Equity Partners) in 2005 through a leveraged buyout (LBO) method.

The first and second trials acquitted former Chairman Sun of breach of trust charges. However, the Supreme Court recognized the breach of trust, stating that since Hi-Mart Holdings, which was not a direct party to the merger and acquisition contract, could cause Hi-Mart to suffer losses if it failed to repay the loan, and sent the case back to the Seoul High Court.

In the retrial at the Seoul High Court, former Chairman Sun was found guilty of breach of trust and sentenced to 5 years in prison, a fine of 30 billion won, and a confiscation of 230 million won. The retrial court pointed out, "For Hi-Mart, all the real estate it held was provided as collateral property for the acquisition loan debt, and if it fails to repay in the future, there is a risk of forced sale. There was no corresponding consideration for this risk burden, which constitutes a breach of duty as the CEO related to the LBO."

Both former Chairman Sun's side and the prosecution appealed this ruling, but the Supreme Court rejected the appeal and confirmed the lower court's decision on this day.

This content was produced with the assistance of AI translation services.