SEOUL: The Seoul District Court issued an arrest warrant on Friday for Hyundai Motor Co Chairman Chung Mong-koo, a judge said.

Judge Lee Jong-seok said he decided to issue the warrant because allegations against Chung are "heavy" and there are concerns that he may destroy evidence if he is not detained.

Prosecutors on Thursday sought the warrant to arrest Chung on suspicion of embezzling company funds to create a slush fund and of causing damage to the company, South Korea's largest automaker.

The 68-year-old head of South Korea's largest automaker entered the court in southern Seoul without being detected by reporters and photographers waiting outside.

Prosecutors suspect Chung of embezzling about 100 billion won (US$106 million) in company money to create a slush fund, and breach of trust for allegedly incurring about 300 billion won (US$320 million) in damages to the company, prosecution spokesman Kang Chan-woo said on Thursday.

The investigation, which began last month, has highlighted concerns in South Korea about transparency at the country's ubiquitous family-run industrial conglomerates, 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 favours 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.

Chung Mong-koo is the eldest son of the late Chung Ju-yung, who founded the Hyundai Group in 1947 and Hyundai Motor in 1967.

The scandal forced the company to delay indefinitely the announcement of its first quarter results scheduled for Thursday and to cancel meetings with potential investors.

Kia Motors earlier postponed a groundbreaking ceremony for a 1.2 billion dollar new US plant in West Point, Georgia while Hyundai Motor has put off a similar event in the Czech Republic.

As the scandal deepened, South Korea's leading newspaper, the Chosun Ilbo, warned that prosecutors should consider the economic impact.

They "cannot lose sight of the status and importance of Hyundai Motor for our economy," it said, noting that the car industry overall accounts for 10 per cent of Gross Domestic Product (GDP) and 11 per cent of South Korean jobs.

Prosecutors rejected pressure to go easy on Hyundai Motor because of its importance to the national economy, saying that the investigation would be conducted according to "principle and law."

The South Korean Government has been on a crusade to stamp out widespread corporate wrongdoing under President Roh Moo-Hyun, elected on an anti-corruption platform in 2002.

With its 40-odd subsidiaries, the Hyundai Motor group is the country's second largest conglomerate after the Samsung Group, with 2005 total sales hitting 85 trillion won.

Analysts say chairman Chung's hard-driving leadership style is behind the company's success.

"Chung Mong-Koo is credited with boldness in decision-making and strong leadership in this expansion drive," said Lim Chae-Gu, an auto industry analyst with Kyobo Securities.

But analysts also link the latest allegations surrounding the alleged group slush fund to his management style in which the chairman alone makes all important decisions.

Source: China Daily