SEOUL, South Korea - Hyundai Motor Co. Chairman Chung Mong-koo was convicted Monday of embezzlement and other charges and sentenced to three years in prison over a slush fund scandal that has weighed on South Korea's largest automaker.

Hyundai Motor Co. Chairman Chung Mong-koo arrives for his trial at the Seoul Central District Court in Seoul, Monday, Feb. 5, 2007. [AP]

Prosecutors, who have been taking a hard line on corruption in South Korea, last month sought a six-year jail term, calling Chung's alleged crimes "grave."

But Judge Kim Dong-oh said the lesser sentence was justified because of Chung's "big contributions to the development of the country's economy" and noted his involvement in charity to atone for his actions.

Still, Kim said Chung's actions were "clearly criminal acts."

Chung had apologized for his actions and his lawyers had argued he be given a suspended sentence - meaning he would not actually serve prison time unless involved in other crimes.

Chung will appeal the verdict, Hyundai Motor said.

"We are greatly disappointed by the court's ruling and it is our intention to file an appeal," company spokesman Oles Gadacz said.

Three other Hyundai officials facing similar charges were also convicted but all given suspended sentences.

Chung will remain free on bail for the time being and doesn't face immediate arrest.

Chung was absent from work for more than two months after being jailed following his April arrest and entering a hospital for a health exam. He was granted bail in June and returned to work in July.

Chung appeared tightlipped and grim as the verdict was read and walked silently from the courtroom after the hearing ended. Hyundai officials who packed into the room for the hearing also were silent.

Prosecutors said Chung illegally raised a 103.4 billion won ($110.4 million) slush fund from affiliates from which authorities say he spent 69.6 billion won ($74.3 million) for private and other purposes, including payments to lobbyists for government favors.

He was also convicted for inflicting financial damage on affiliates through questionable deals and arrangements that allegedly protected or boosted the financial interests of him and his son, Eui-sun, who heads Kia Motors Corp., the country's second-largest carmaker. The younger Chung doesn't face trial.

The senior Chung had pleaded for leniency, apologizing in court for "causing trouble over this case" and pledging to make Hyundai the world's No. 5 automaker if given the chance.

Shares in Hyundai Motor fell 2.6 percent on the news to 68,000 won ($72.60) as traders had expected a more lenient suspended sentence.

"The verdict is likely to hurt (Hyundai's) company image and business activity in the near term," said Stephen Ahn, analyst at Woori Investment and Securities.