Fugitive Former Leader of Daewoo Returns to South Korea, Is Arrested

SHANGHAI —  The South Korean industrialist who fled the country as his Daewoo Group tumbled into one of the world’s largest bankruptcies returned home today, ending nearly six years on the run.

The return and immediate arrest of Kim Woo Choong, one of Asia’s most notorious fugitives, immediately stirred intense debate on how to deal with the man who represented South Korea’s miraculous economic rise as well as its colossal setbacks from crony capitalism.

Kim, 68 and apparently suffering from a lengthy illness, arrived in the early morning at Incheon International Airport just outside of Seoul, accompanied by a retinue that included his doctor and lawyer. Kim flew in from Hanoi, although he has reportedly been traveling on a French passport and spotted in numerous countries since he slipped out of South Korea in October 1999 while on a business trip to China.

Kim’s expected return came amid the nation’s half-hearted corporate governance reforms and growing concerns about the durability of its economic recovery after its fall during the Asian financial crisis of 1997-98. Daewoo’s collapse, which led to General Motors Corp. buying assets of Daewoo Motors, has been likened to the Enron Corp. debacle in the United States.

“Because of me, there has been a lot of affliction. I have come back to take responsibility for what happened at Daewoo Group,” Kim told reporters on the plane, according to Korean media accounts. “I’m so sorry,” he said. “I am very sick.”

Upon his arrival at Incheon, where throngs of activists for and against Kim clashed with each other and police, Kim was immediately whisked away by authorities to the Supreme Prosecutors’ Office in southern Seoul, according to Korean news reports.

Kim faces charges of fraudulently borrowing about $9 billion by inflating the company’s books and smuggling billions more of company funds overseas. He also is suspected of embezzling corporate funds and bribing politicians.

At one time, the trim and bespectacled workaholic was perhaps Korea’s most revered business executive, having built a one-room textile export operation into South Korea’s second-largest family-owned conglomerate, or chaebol. Before it was forcibly splintered after collapsing under $70 billion of debt, Kim’s empire included auto making, hotels, electronics and shipbuilding that at its peak accounted for 10% of South Korea’s economy.

But his close government connections, which began with backing from President Park Chung Hee in the mid-1970s, and subsequent alleged corporate misdeeds turned him into an international fugitive.

Although South Korean authorities have suggested that Kim will be prosecuted, there are signs that he may face little if any punishment, just like scores of other business executives and politicians convicted of bribery and other violations in the aftermath of the nation’s financial crash in 1997.

In recent months, top officials of South Korea’s other chaebols, including Hyundai and Samsung, had their jail sentences suspended after they were found in violation of political funding laws. And just last week, Chey Tae Won, chairman of giant SK Corp., was granted probation by South Korea’s appellate court instead of a prison term for a massive accounting fraud.

Some judicial officials, business leaders and others have urged leniency for corporate executives on grounds that consideration should be given to those running companies that drive the nation’s fragile economy, which has struggled since the 1997 collapse and a subsequent credit card debacle in late 2002.

But other analysts and fund managers, including those in the United States with stakes in South Korean companies, have said that such actions send a wrong message to South Korea’s businesspeople and undermine the nation’s legal reforms that aim to shore up corporate governance.

It appeared unlikely that Kim would try to reclaim a role in managing what’s left of Daewoo. Some South Korean experts speculated that although Kim would have to endure a process of questioning, public apology and perhaps a trial for his deeds, it was possible that he may have already struck a deal for clemency with South Korean President Roh Moo-hyun.

It has been customary for South Korean presidents to grant special pardons on national holidays. On May 15, Buddha’s birthday, Roh granted amnesty to several former Daewoo executives convicted in the accounting fraud, according to Yonhap News Agency. The next major national holiday is August 15, South Korea’s Independence Day.

Kim’s health -- one report said he had heart problems -- may also play a role in his possible release.

“There’s been talk among lawyers who’d worked with Kim Woo Choong that he came back because he was ill, that there might be a sentence and maybe a pardon,” said Michael Breen, a public relations consultant in South Korea and author of the book “The Koreans.”

Among South Korean citizens, opinions are divided. When word spread that Kim was coming home, about half of those surveyed in a newspaper poll this month said Kim should be punished. But the other half said he should face legal proceedings and then be released, or that he shouldn’t go through the process at all.

“There must be fraud, Enron-style, and he should face the music,” Breen said. “Even Koreans think that in one way. But he wasn’t behaving in a way that the government wasn’t encouraging, or in a way that heads of other chaebols wouldn’t have acted in the same situation.”

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Times staff writer Mark Magnier in Beijing contributed to this report.