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September 13, 2006 5:11 pm

Hynix sues Hyundai chairwoman over losses

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South Korea’s Hynix Semiconductor on Wednesday said it had sued the chairwoman of its former parent Hyundai Group and seven former executives to seek Won82bn ($85m) in damages for losses they caused to the company through alleged irregular accounting and misuse of company funds.

Hynix said in a complaint filed with the Seoul Central District Court that Chung Mong-hun, former chairman of Hyundai Group and the executives allegedly caused the company heavy losses by creating slush funds, embezzling company funds, and providing unfair financial support to subsidiaries.

It said the former managers cost the company Won29bn by creating a slush fund and misstating its financials in 1996-2000. And it claimed they provided financial support of Won41.7bn to a paper subsidiary without board approval, and failed to get back part of it. It alleges they also provided another unit Halla Construction with Won21.8bn by buying its commercial papers, which was seen as a very risky investment.

Hynix said it included Hyun Jeong Eun in the suit as she inherited the chairmanship from her late husband after Mr Chung killed himself three years ago due to an investigation into Hyundai’s illegal money transfer to North Korea.

A spokeswoman for Hyundai said Ms Hyun had been trying to pay down the group’s debts amassed under Mr Chung’s tenure.

Hynix’s former managers have already been prosecuted in a criminal court and three of them – the former president and two former vice-presidents – are appealing the case after getting suspended sentences.

Hynix, which was known as Hyundai Electronics before it was spun off from Hyundai Group in 2001, has made a strong comeback through large bail-outs and tough restructuring. The company was fined Won2bn two years ago for breaking accounting rules between 1999 and 2003.

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