Former Edison Motors Chairman Kang Young-kwon, who was indicted on charges of embezzling a total of 10 billion KRW under the pretext of loans and investments from the Small and Medium Business Corporation (SBC) and others by presenting an unfeasible plan for mass production of electric vehicles and motor development, was acquitted in the first trial.
The Criminal Division 13 of the Seoul Southern District Court (Presiding Judge Kim Sang-yeon) held a sentencing hearing at 2 p.m. on the 29th and acquitted former Chairman Kang (65), who was charged with violating the Act on the Aggravated Punishment of Specific Economic Crimes (fraud). Executive Cha (53), who was also indicted on the same charges, was acquitted as well.
The court stated, “There was no standard to determine the exact launch date of the electric truck, and although the launch was delayed at the time, it was recognized that the delay was due to difficulties in parts supply caused by COVID-19 quarantine measures. Also, it takes about 2 to 3 months to obtain certification from the Ministry of Land, Infrastructure and Transport, the Ministry of Environment, and the Ministry of Trade, Industry and Energy, but the defendants conducted certification tests simultaneously aiming to complete certification within 3 months.” The court added, “The exhibition and sales figures of the electric truck were performance forecasts and could vary depending on various future variables. Failure to achieve them does not necessarily mean they were false.”
Regarding the ‘MSO Coil (coil),’ the court said, “At the time, the defendant made efforts toward the commercialization of the ‘MSO Coil’ and achieved considerable results,” and “therefore, it is difficult to conclude that the statement in the investment screening application that commercialization was possible by the first half of 2019 was false.”
On the acquisition of Ssangyong Motor, the court ruled, “Edison Motors’ acquisition of Ssangyong Motor appears to be an important factor in evaluating future value,” but added, “Whether there were falsehoods in the documents submitted to Gyeongnam Venture Investment is a separate issue.” The court further stated, “It seems that Edison Motors did not fail to present a reasonable plan for acquisition management, but rather that Pyeongtaek City expressed negative opinions on the construction of the Ssangyong Motor site, and construction companies and others indicated their intention to withdraw investment. This was also recognized by the investment screening committee, so it is difficult to view it as false and there is no basis to acknowledge it.”
Earlier, the prosecution had requested a 10-year prison sentence each for former Chairman Kang and Mr. Cha last month.
Former Chairman Kang and Mr. Cha are accused of deceiving the Small and Medium Business Corporation and local venture investment companies from 2018 to 2021 by claiming that the funds would be used for Edison Motors’ development funds and Ssangyong Motor acquisition funds, and embezzling a total of 10 billion KRW through loans and investments. The prosecution indicted former Chairman Kang and others in April last year, alleging that they committed the crime knowing that the projects such as ‘mass production of electric trucks’ and ‘commercialization of MSO Coil motors’ were unfeasible.
Previously, Edison Motors was selected as the preferred bidder for the acquisition and merger (M&A) of Ssangyong Motor, which filed for corporate rehabilitation procedures in 2021 due to worsening financial conditions, but the contract was terminated in March of the following year as they failed to pay the remaining acquisition price during the rehabilitation process. The stock price of Edison EV (now Smart Solutions), which rose on news of the Ssangyong Motor acquisition, fell along with the contract termination.
Meanwhile, former Chairman Kang and executives have been on trial since December 2022 on charges of violating the Capital Markets and Financial Investment Services Act and others. They are accused of manipulating the stock price of the KOSDAQ-listed Edison EV by falsely announcing and issuing press releases from May 2021 to March last year, pretending to acquire Ssangyong Motor. It is reported that they gained approximately 162.1 billion KRW in capital gains through stock price manipulation.
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