A Seoul district court today handed down stiff prison sentences and fines to a group of South Korean bankers, business executives and moneylenders for their roles in a three-month-old, multimillion-dollar loan scandal that has rocked the government of President Chun Doo Hwan.
The court's action, involving relatives by marriage of Chun's wife, Soon Ja Lee, has been widely interpreted by observers in Seoul as a bid to restore badly strained public confidence and stability to the economy, both of which were badly shaken by the financial swindle, the largest in South Korea's history.
Senior Judge Huh Chung Hoon sentenced former South Korean national assemblyman Lee Chul Hee and his wife, Chung Yong Ja, to maximum 15-year prison terms on a variety of charges including bribery, embezzlement and violation of the country's foreign exchange control laws. They were ordered to pay fines totaling about $220,000. All 29 other defendants in the case were found guilty, with 22 receiving prison terms ranging from one to seven years.
The loan swindle perpetrated by the moneylending couple was disclosed by public prosecutors in May at the time of two major corporate bankruptcies and the collapse of South Korea's vast unofficial loan market. Thirty-one people were arrested, including prominent bankers, company executives, money brokers and an influential uncle of the first lady.
Lee Chul Hee, a former deputy director of the Korean Central Intelligence Agency, and his wife, Chang Yong Ja, were arrested on charges of defrauding six Korean companies in a string of questionable loan deals and commercial paper transactions that allegedly netted them $270 million. Chang, who is related to Chun's wife by marriage, allegedly paid Lee Kyu Kwan $142,000 in bribes for his help in arranging government approval for a banking venture being promoted by her husband. Lee, an uncle of the South Korean first lady, was arrested later on charges of influence peddling and resigned his post as president of the influential Korean Mining Promotion Corp. The court sentenced Lee to a four-year jail term and fined him $140,000.
The staggering sums involved in the loan scam churned up strong emotions in South Korea. Reports of Chang Yong Ja's financial escapades dominated the South Korean news media, which called her the "Curb Money Queen." Prosecutors said that nearly a billion dollars' worth of promissory notes had passed through her hands since 1979.
The affair has prompted Chun to reshuffle his Cabinet three times amid calls from opposition leaders for his resignation and acceptance of moral responsibility under the country's stern code of Confucian ethics.