South Korea probes Hyundai over political lobbying

SEOUL, Mar 27 (Reuters) South Korea has barred about 10 officials at South Korea's top auto maker, Hyundai Motor Co., and its affiliates from leaving the country over a probe into suspected illegal political lobbying, a prosecution official said on Monday.

Prosecutors also detained Lee Ju-eun, the chief executive of car shipper Glovis Co. Ltd., a Hyundai affiliate, for questioning over allegations that he was involved in raising slush funds used to lobby politicians, added the official.

Shares of Glovis plunged by a daily limit of 15 per cent to 39,950 won, their lowest since the stock was listed on Dec. 26 last year.

Hyundai Motor shares dropped 2.58 per cent to 79,300 won while its affiliate Kia fell 2.21 per cent to close at 19,950 won.

On Sunday, prosecutors raided offices of Hyundai Motor, Kia Motors Corp. and two other units.

''Glovis' CEO was detained in accordance with a (detention) warrant,'' the official from South Korea's Supreme Prosecutors' Office told Reuters by telephone, asking not to be identified.

''We are investigating him in connection to how much was raised in slush funds, how they were raised and where they were used. We also have to investigate if they were used for lobbying.'' A Glovis spokesman declined to comment.

About 10 officials at Hyundai Motor and its related companies were ordered not to leave the country for questioning, the prosecution official added, declining to identify them.

Hyundai Motor spokesman Jake Jang said prosecutors searched the head offices of the four companies, including auto parts maker Hyundai Autonet and Glovis, on Sunday.

It was the first time prosecutors had raided headquarters of top conglomerates since an investigation into election campaign funding in 2003 and 2004, the Chosun Ilbo daily newspaper said.

Hyundai Motor Chairman Chung Mong-koo and his son, Chung Eui-sun, president of Kia, own a combined 60 per cent of Glovis.

The prosecution official said the investigation was linked to a probe into a local businesman alleged to have received funds from the companies for political lobbying.

The prosecution would decide whether to seek a full arrest warrant for the CEO of Glovis by Tuesday morning, the official added.

In South Korea, prosecutors can detain people for questioning, before deciding whether to indict them.

Analysts said news of the investigation would undermine investor sentiment for the automotive group units in the short term, but was unlikely to have a major impact.

''The raid on the Hyundai Automotive Group was a matter of a conglomerate's morality,'' Samsung Securities' analyst Kim Hak-ju said in a research note. ''But it will not set back the group's businesses.'' REUTERS SD DS1600