Hyosung Chairman Cho Hyun-jun Fined 200 Million Won Again in Second Trial for Unfair Support to Affiliates

[Image source=Yonhap News]

[Asia Economy Reporter Kim Daehyun] Cho Hyun-joon, chairman of the Hyosung Group, who was prosecuted on charges of 'unfair support to affiliates,' was sentenced to a fine of 200 million won in the second trial as well.

On the morning of the 22nd, the Seoul Central District Court Criminal Appeal Division 4-1 (Presiding Judge Yang Jijeong, Jeon Yeonsuk, Cha Eun-gyeong) dismissed Chairman Cho's appeal, who was indicted for violating the Fair Trade Act. As in the first trial, the Hyosung corporation, which was also indicted, was fined 200 million won, and former Hyosung Finance Headquarters Fund Team Leader Lim Mo, Hyosung Investment & Development CEO Song Hyeong-jin, and Hyosung Investment & Development corporation were each fined 50 million won.

Earlier, in December 2019, Chairman Cho was prosecuted on charges of illegally supporting GE, an affiliate where he is the largest shareholder, through total return swap (TRS) transactions via Hyosung Group affiliate Hyosung Investment & Development. TRS refers to a transaction method in which a financial company establishes a special purpose company (SPC) to purchase specific company stocks and receives regular fees from the investment destination of that company.

The Fair Trade Commission judged that when GE, Chairman Cho's personal company, faced the risk of being delisted due to management difficulties, the group provided funds by offering a free guarantee for about 25 billion won of convertible bonds (CB) issued by GE, and reported Chairman Cho and others to the prosecution in 2018.

The first trial stated, "Due to unfair support, Galaxia Electronics (GE) escaped the crisis situation, and defendant Cho Hyun-joon received unfair economic benefits such as maintaining management rights 'free of charge.' Using affiliates for the personal benefit of the head of a large business group lowers corporate transparency and negatively affects the entire national economy by transferring insolvency to other affiliates."

However, it added, "Although it is clear that the scale of economic benefits is considered unfair, the amount was not specifically calculated," and "Since the risks and losses that Hyosung Investment & Development had to bear did not materialize, it can be evaluated that Hyosung did not suffer actual damage." Furthermore, "The actual transaction counterparty of Hyosung Investment & Development is GE, and this support transaction is judged to have involved a third party as a mediator to evade related regulations," and Chairman Cho played a key role by effectively 'directing' each transaction process.

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