The guilty verdict for former SK Group Chairman Chey Tae-won by the Seoul Central District Court on Jan. 31 has rattled business groups who fear that the economic democratization called for by the political circles might go too far and hamper their business activities. 

The Federation of Korean Industries (FKI) issued a statement saying that it is a shame that Chairman Chey was put in jail without consideration of his contributions to the nation with his many achievements both in business and social terms that helped Korea to grow and become what it is today during his long years leading SK Group, the nation’s third largest conglomerate.

The statement said the business community fears that the anti-business sentiment might further expand and hamper business activities in the days to come.

The 52-year-old tycoon, now chairman of SK Holdings, was immediately put behind bars on Jan. 31 after receiving a four-year jail sentence for embezzlement and breach of trust.

SK Group, one of South Korea’s top five chaebol (industrial conglomerates), covers a broad spectrum of businesses through its affiliates. The group’s operations range from energy and telecommunications to finance and construction. Its energy and chemical arm, SK Innovation, is Korea’s largest petroleum refiner. Outside of Korea, SK Group operates 210 corporations and more than 70 subsidiaries in more than 40 countries. Like other chaebol forced to reorganize in the wake of the Korean financial collapse of the late-1990s, SK Group has pared down its affiliates for greater operational efficiency. The group’s turnover totaled $134 billion in 2011.

This is the second time Chey has been imprisoned in about 10 years --- he was jailed in 2003 for masterminding a large-scale accounting fraud, but was later granted a presidential pardon.

In the latest case, the prosecution claimed he colluded with his younger brother Chey Jae-won, a vice chairman of SK Group, to embezzle 49.7 billion won ($44.5 million) of company funds in 2008. The money was part of 280 billion won from 18 SK affiliates, which had been set aside for investment in a financial unit, Benex Investment.

Chey was also charged with creating a slush fund of some 13.9 billion won between 2005 and 2010.

The Seoul Central District Court convicted the chairman of embezzling company funds, but found his brother not guilty.

The impact on SK Group and its affiliates following the imprisonment of Chey Tae-won will be limited and short-lived because the group had prepared for the worst-case scenario, industry insiders said on Feb. 1. 

The group immediately launched an emergency management system upon the court’s ruling on Jan. 31 in order to minimize the impact of Chey’s absence during his four-year jail term.

Officials from the group dismissed concerns over the impact of his absence on the domestic business, although they expressed concern over global projects initiated and led by Chey.

“The operation of our business will not be hit hard by the imprisonment of Chey,” an SK official said. “But the problem is that we may see setbacks in large-scale global projects related to the development of new energy sources and semiconductors, which Chey has actively led.”

Now, the group’s decision-making body, Supex, chaired by Kim Chang-guen and the board directors of the group’s affiliates, will make key decisions such as investments in affiliates and the appointment of a CEO.

It has been alleged that the group recently conducted a large-scale reshuffle and that a chairman of SK Chemical was appointed to replace him in January as a pre-emptive move to avoid a managerial vacuum in the event of Chey being imprisoned. The group has strongly refuted that claim.  

In December, however, Chey stepped down from the top SK post and Kim, then vice chairman of SK Chemical, was named to chair Supex to oversee the group.