Prosecution Seeks 2-Year Prison Sentence for Hyosung Chairman Cho Hyun-joon on Charges of Unfair Support to Affiliates

Hyosung Corporation and Hyosung Investment Development Sentenced to Fines of 200 Million KRW and 40 Million KRW Respectively

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] The prosecution has requested a prison sentence for Cho Hyun-joon, chairman of the Hyosung Group, who is on trial for unfair support of affiliates.

On the 25th, the prosecution requested the court to sentence the defendant to two years in prison during the sentencing hearing for Chairman Cho, held under the presiding judge Yang Hwan-seung of the Criminal Division 3 at the Seoul Central District Court. Additionally, the prosecution requested a fine of 200 million KRW for Hyosung Corporation and 40 million KRW for Hyosung Investment & Development. Both Hyosung Corporation and Hyosung Investment & Development were jointly indicted under the joint penalty regulation.

The prosecution stated, "This case involves treating Hyosung Investment & Development, a subsidiary of the listed company Hyosung, as an appendage of the Hyosung Group or as the personal property of defendant Cho Hyun-joon," and added, "The defendants have denied the alleged crimes from the Fair Trade Commission (FTC) investigation through the trial."

In December 2019, Chairman Cho was brought to trial on charges of unfairly supporting the affiliate Galaxia Electronics (GE) through a total return swap (TRS) transaction, violating the Fair Trade Act. A TRS is a transaction where a financial company establishes a special purpose company (SPC) to purchase shares of a specific company and regularly receives fees from the investor intending to invest in that company. TRS is similar in nature to debt guarantees and is often abused when companies support affiliates or evade governance regulations.

The FTC believes that GE was effectively Chairman Cho's personal company and, facing a crisis of being delisted due to management difficulties, the group planned support measures and provided funds through TRS transactions. In April 2018, the FTC reported Chairman Cho and others to the prosecution for these reasons.

The first trial sentencing hearing for Chairman Cho and others is scheduled for 10 a.m. on March 15.