'Lee family created slush fund'

By Kim Rahn

An independent counsel who in 2008 investigated President Lee Myung-bak’s alleged involvement in a financial scam at investment firm BBK discovered a slush fund created by the Lee family but covered it up, a local daily reported Friday.

The Lee family created the slush fund using auto parts maker DAS, which is owned by the President’s eldest brother Lee Sang-eun, the liberal daily Hankyoreh reported, citing investigators who belonged to the 2008 team. There have been rumors that the firmreal owner is the President.

When the probe team reportedly discovered the slush fund, it was only days before then President-elect Lee’s inauguration. The newspaper raised suspicions that the counsel attempted to keep the slush fund secret to curry favor with the incoming President.

The suspicion, however, may have to be re-investigated along with a separate ongoing probe into a property deal for a now-scrapped project for the President’s retirement home, because Lee’s son claimed that he borrowed money from his uncle Lee Sang-eun. So attention is now on a possible link between the slush fund and the loan.

The newspaper said that during the investigation conducted by special prosecutor Chung Ho-young from January to February 2008, the team traced the money flow to bank accounts related to DAS and confirmed that the company created 13-15 billion won in a slush fund between 2003 and 2008.

“We also found out that an accountant at DAS, who managed the slush fund, misappropriated 300 million won to buy an apartment. We questioned him. But we didn’t investigate it further,” an investigator was quoted as saying.

The team was organized following public distrust in the prosecution’s investigation into the BBK financial scam conducted at the end of 2007 just ahead of the presidential election.

It was alleged that Lee participated in stock price manipulation at BBK, set up by his former business partner Kim Kyung-joon, who claimed that Lee was the actual owner of the firm. DAS, founded under the names of Lee’s brother Sang-eun and the late brother-in-law Kim Jae-jeong, invested 19 billion won into BBK, and it was alleged that the President also actually owned DAS.

Both the prosecution and the special prosecutor cleared Lee of the allegations in 2007 and 2008, saying that Lee was not the real owner of BBK and DAS. The latter’s investigation result was announced four days before Lee’s inauguration.

According to the daily, however, the special prosecutor discovered the slush fund at DAS. “If it had unearthed who ordered the fund created and spent the money, it would have been able to confirm who the real owner of DAS was. But the team didn’t check it and closed the case,” the Hankyoreh reported.

A firm’s creation of such a huge slush fund is usually subject to punishment on involved figures for embezzlement and tax evasion. But the special prosecutor didn’t report the allegation to the tax authorities.

The team did question Lee at that time — at a restaurant in Seoul five days before announcing the probe result but only for three hours including dinner.

Lee’s 34-year-old son has been working at DAS as an executive since August 2010.