Facing the Music

When Daewoo founder Kim Woo Choong fled South Korea in 1999, his giant conglomerate had collapsed under $80 billion of debts. Kim returned home last week after nearly six years on the run in France, Vietnam and Sudan (among other places), to face charges of fraud and foreign-currency violations that could land him in jail for life. It was an extraordinary comedown for a legendary businessman who had turned a $5,000 investment in the 1960s into South Korea's second biggest chaebol, once employing 250,000 people.

After his arrest at Incheon International Airport last Tuesday, prosecutors say Kim admitted to breaking the law to keep Daewoo afloat in the wake of the 1997 Asian financial crisis, which had badly damaged the debt-ridden conglomerate. Kim, according to investigators, said he had concealed $27 billion in losses, fraudulently borrowed $5.7 billion and illegally transferred $1 billion overseas. In a letter to the Korean people released on his arrival, Kim wrote: "I sincerely apologize to all of you who have sacrificed so much because of my faults." Prosecutors allege the sums involved were actually even larger. They also plan an investigation into possible misuse of government emergency funds given to Daewoo after the regional crisis.

But will Kim, now 68, end up doing serious time behind bars? In the past, South Korea has often proved loath to jail corporate criminals. Earlier this month, after upholding a stock-manipulation conviction for Chey Tae Won, chairman of SK Corp., a court suspended Chey's three-year prison term and allowed him to continue leading the company. In May, President Roh Moo Hyun pardoned top executives at Samsung Corp., LG Corp. and Hyundai Motor in an amnesty to mark Buddha's birthday. Also pardoned were four Daewoo executives convicted earlier this year of hiding losses during the conglomerate's collapse. Health problems may also buy Kim some lenience—according to one associate, Kim has had five operations for an intestinal condition and needs heart surgery for two blocked arteries. Michael Breen, a longtime observer of Korea Inc. and author of the book The Koreans, predicts: "The world's biggest bankruptcy will end with a judicial whimper."

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