Opposition party leader entangled in multiple corruption allegations

Rep. Lee Jae-myung, chief of the Democratic Party of Korea, gestures as he speaks during a media briefing at the National Assembly on Yeouido, Seoul, Oct. 21. Korea Times photo by Oh Dae-geun

Prosecutors' investigations corner Lee Jae-myung after his key aides arrested on bribery charges

By Lee Hyo-jin

Lee Jae-myung's return to politics has been smooth. He won a National Assembly seat in the by-election held in June, merely three months after his defeat in the March 9 presidential election. He then became chairman of the Democratic Party of Korea (DPK), the main opposition and majority party controlling the National Assembly.

Though it's been smooth sailing for his post-presidential election career, his fate as a politician is now being put to the test. He is implicated in multiple corruption allegations. If found guilty on any of the counts, the 57-year-old lawmaker's political career could come to an abrupt end.

In recent months, the prosecutors' offices in Seoul, Suwon and Seongnam in Gyeonggi Province and Daejeon have been ramping up their corruption and bribery investigations involving the Democratic Party of Korea (DPK) leader.

As the authorities continue to investigate the allegations, the situation has been turning unfavorable for Lee. Along with seizure of evidence and searches at the party's headquarters, his close aides have been arrested or indicted amid the accelerating investigations which are expected to eventually hone in on Lee.

Speculations encircling the DPK leader are concentrated within the period when he was mayor of Seongnam, the second-largest city of Gyeonggi Province, between 2010 and 2018, and then took office as Gyeonggi governor from 2018 to 2021.

The allegations include a controversial land development scandal which has now grown into illegal political funding allegations, bribery speculations involving the underwear company Ssangbangwool and another bribery case involving a city-owned football team.

Corruption-ridden urban development project

More than a year after an investigation began into a controversial land development project in Seongnam, which was initially launched in September 2021, it seems to be picking up speed in the last few weeks after revelations were made by key figures.

Daejang-dong area in Seongnam, Gyeonggi Province, is seen in this photo taken on Sept. 24, 2021. Newsis

The urban development project to build apartment complexes in the city's Daejang-dong began in 2015 when Lee was mayor of the city.

The key figures in the case are Seongnam Development Corp.'s former acting President Yoo Dong-gyu, Hwacheon Daeyu Asset Management owner Kim Man-bae and lawyer Nam Wook. They have been accused of manipulating the public bidding procedure to have Kim's lesser-known asset firm selected as a private partner in the public-private consortium.

The asset management firm eventually raked in astronomical dividends from the project amounting to 57.7 billion won, which was more than 1,000 times its initial investment.

Until recently, the prosecutors had not found any meaningful connections between the development project and Lee, who has been arguing that his only fault was in failing to properly oversee the project as the city's top-decision maker, stressing that he did not gain a single penny from it.

However, Yoo, who was indicted in October last year, started to speak upon his release after a year of pre-trial detention.

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Yoo Dong-gyu, left, shakes hands with then Gyeonggi Governor Lee Jae-myung after the former was appointed as president of the Gyeonggi Tourism Organization, Oct. 1, 2018. Newsis

Yoo said he colluded with Nam in delivering 847 million won in profits from the land development scheme to Kim Yong, deputy director of a DPK-affiliated think tank and a close aide of Lee, between April and August in 2021. Yoo claimed the kickbacks were used for funding Lee's election campaign to win the party primary for the presidential election.

Kim, who was arrested on Oct. 19 on charges of violating the Election Fund Act, is flatly denying all charges.

Kim Yong, deputy director of a DPK-affiliated think tank / Korea Times file

Yoo also testified that the real estate developers gave about 140 million won to Jeong Jin-sang, another confidant of Lee who now serves as vice chief of staff in his party, between 2013 and 2020. Of the funds, the prosecutors believe 50 million won was delivered in 2014 ahead of the local elections to be used for campaign funds. Lee was reelected as Seongnam mayor that year.

In return, Jeong allegedly leaked information about the Daejang-dong development plan to the private investors that he obtained while serving as a high-level government official of Seongnam City and later Gyeonggi Province.

On Tuesday, Jeong was summoned for questioning at the Seoul Central District Prosecutors' Office. The prosecutors are anticipated to issue an arrest warrant for him, which would further corner the DPK leader.

After the prosecution searched Jeong's home and office on Nov. 11, Lee claimed innocence and called the Daejang-dong scandal "a poorly written novel" by the prosecutors. Stating that the truth will be disclosed, he demanded an independent counsel probe into the allegations.

Lee's call for the special counsel probe is being supported by DPK lawmakers, who claim that ongoing investigations and allegations targeting him are "political retaliation" against the opposition party. They speculate that President Yoon Suk-yeol, who had been prosecutor general before running for president, could be behind the prosecutors' moves.

Bribery allegations involving Ssangbangwool

Bribery allegations that the Gyeonggi Province deputy governor received funds from underwear group Ssangbangwool when the DPK chief was the governor of the province have now developed to include alleged smuggling of foreign currency to North Korea.

On Oct. 14, the prosecution indicted former Gyeonggi Province Deputy Governor for Peace Lee Hwa-young, another close aide of the DPK chairman, for receiving over 250 million won in bribes from Ssangbangwool from August 2018 to early this year, in return for favors related to inter-Korean economic business projects.

Ssangbangwool Group headquarters in Seoul / Newsis

In May 2019, a Ssangbangwool-affiliate concluded a business agreement with North Korea's National Economic Cooperation Federation, with a promise to make additional payments afterwards.

The prosecutors found that around that time, about 60 Ssangbangwool employees took flights multiple times to China's Shenyang Taoxian International Airport, carrying undeclared currency to the value of tens of millions of won, and handed them to the company's vice chairman. The final destination of the smuggled money is speculated to be North Korea.

The prosecutors have yet to connect Lee to the foreign currency smuggling which took place while he was the governor of Gyeonggi Province. The ruling party suggests that Lee would have been aware of the suspicious flow of money given that Lee Hwa-young, his close aide, is at the center of the allegations.

In a separate case, Ssangbangwool is also alleged to have paid some 2 billion won to help cover Lee's legal fees in return for business favors.

Suspicious donations to Seongnam FC

Moreover, the prosecution is stepping up its investigation into suspicions that Lee gained benefits from hefty donations made by companies through Seongnam FC, a city-owned football club, while he was the mayor.

Between 2015 and 2017, six companies ― Doosan Engineering & Construction, Naver, CHA Bundang Medical Center, NongHyup, Alphadom City and Hyundai Department Store ― donated a total of 16 billion won to the football club for advertising expenses and sponsorships, but prosecutors allege that some donations were made in return for benefits and favors.

In particular, Lee is suspected of changing the zoning of a 9,900-square-meter area of land owned by Doosan in Bundang District, allowing for commercial use of the area instead of building a hospital there as was planned initially. The city government gave other benefits to Doosan in regard to building permits, which contributed to a huge jump in property value.

Police who investigated the case had concluded that only Doosan was to be charged in the case but the prosecution, having taken over the case, has expanded the probe to include the five other corporations.