Hyundai Motor Chairman Arrested

Prosecutors on Friday arrested Hyundai Motor Co. Chairman Chung Mong-koo in an embezzlement and slush fund scandal engulfing South Korea's largest automaker, an official said.

Chung's arrest, announced by prosecution spokesman Kang Chan-woo, came after the Seoul District Court earlier issued a warrant.

Prosecutors suspect Chung of embezzling about $106 million in company money to create a slush fund, and breach of trust for allegedly incurring about $320 million in damages to the company, prosecution spokesman Kang Chan-woo said Thursday.

The investigation, which began last month, has highlighted concerns in South Korea about transparency at the country's ubiquitous family-run industrial conglomerates, or chaebol, where lax corporate governance has been a problem.

Prosecutors have raided Hyundai and three of its affiliates — Kia Motors Corp., logistics unit Glovis Co. and auto-parts maker Hyundai Autonet — and questioned key officials.

Investigators say officials embezzled money from affiliates to create the slush fund and used it, via at least two lobbyists, to seek favors from the government.

The lobbyists have been arrested on charges of receiving money from Hyundai in exchange for promises to help it win construction approvals and permits, and other business favors.

It is unclear if the lobbyists bribed government officials. In any case, it is illegal in South Korea to accept money in return for exercising influence.

Prosecutors said they planned to continue investigating Kia President Chung Eui-sun, though weren't planning to seek his arrest. He is the only son of the Hyundai chief.

Last week, Hyundai announced that the Chungs planned to donate $1.1 billion worth of personal assets to society, and that the company "apologizes" for causing worries to the public over the scandal.