Daewoo boss arrested on his return to Seoul

SEOUL - Daewoo Group founder Kim Woo Choong, who fled South Korea almost six years ago when his business empire collapsed, was arrested on his return to Seoul yesterday to face charges in a 41 trillion won ($60 billion) fraud.

Kim, who built South Korea's second-largest business group, was taken to the Supreme Prosecutors' Office after arriving on a flight from Hanoi.

Protesters at Incheon International Airport called for the 68-year-old to be prosecuted and for parliamentary hearings to be held.

"I am solely responsible for Daewoo Group's inability to overcome the financial crisis and become a burden on the national economy," Kim, who doesn't hold stakes in the companies he once controlled, said in a statement. "I will accept the appropriate consequences from legal authorities."

Daewoo Group was the biggest casualty of the 1997 financial crisis that forced South Korea's Government to seek a US$57 billion ($80.6 billion) bailout led by the International Monetary Fund.

Kim was accused of exaggerating assets by 41 trillion won and borrowing 10 trillion won on the basis of this fraud to expand an empire that made everything from clothes to ships.

"His major response to the crisis was to be a thorn in the Government's side, to keep spending more, not less," said Hank Morris, a director at Industrial Research & Consulting, who has worked in South Korea for 26 years.

Prosecutors said Kim & Chang, South Korea's biggest law firm, which represents Kim, had delivered a statement of surrender and asked for the investigation to be reopened.

Kim built a 78 trillion won business group over three decades, starting from a textile export business financed with a 5 million won loan from a businessman impressed by his marketing skills.

At its peak, the group had 396 business branches abroad, with interests in cars, shipbuilding, electronics and financial services.

By 1999, Daewoo owed foreign and domestic creditors 87 trillion won - the size of the Czech Republic's annual economic output at the time.

Kim was also charged with embezzling 20 trillion won through Daewoo's London-based financial unit, failing to report six units to authorities and bribing politicians to bail out his troubled group.

If convicted on any of these charges, Kim, who also has French citizenship, could face five years to life in prison.

The Supreme Court convicted seven former Daewoo officials in April, sentencing them to prison terms ranging from three to five years with a total fine of 23 trillion won, a record in South Korea. All their jail sentences were suspended.

About 40 private lawsuits are pending against Kim, seeking 600 billion won in combined damages, according to a statement by the People's Solidarity for Participatory Democracy, a South Korean civic group.

Kim fled South Korea in October 1999 after Daewoo said it couldn't pay debts, triggering the group's collapse.

Debt daze

The 78 trillion won business group was built up over three decades.

It started as a textile export business financed with a 5 million won loan.

At its peak, the group had 396 business branches abroad, with interests in cars, shipbuilding, electronics and financial services.

By 1999, it owed foreign and domestic creditors 87 trillion won - the size of the Czech Republic's annual economic output at the time.

- BLOOMBERG