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Prosecutors raid home in growing Busan-gate case

Lee Young-bok allegedly bribed officials to alter construction guidelines

Nov 18,2016
LCT, a high-rise apartment complex near Haeundae Beach, is under construction on Thursday. Lee Young-bok, the developer of LCT, is accused of embezzling 57 billion won (48.55 million dollar) from the project and is suspected of bribing politicians from both sides of the aisle. [NEWSIS]
Prosecutors raided on Thursday the home of a man who organized an exclusive social group whose members included Choi Soon-sil and Lee Young-bok, the developer of the controversial Busan high-rise apartment complex who is accused of lobbying incumbent lawmakers.

Although Lee has denied knowing the president’s confidante, Choi Soon-sil, who is mired in corruption allegations, his scandal is drawing ever closer to the so-called Choi-gate scandal.

“They joined at different times but they were part of the same social group,” said the organizer of the group, a man who is surnamed Kim. According to Kim, Lee joined in 2011 and Choi in 2013.

The group’s monthly membership fee is 4 million won ($3,406) and it gathers some 100 million won total per month. Choi reportedly paid her 4 million won in September even as she was in Germany, having fled there after the scandal broke.

Choi is accused of meddling in state affairs, having access to top presidential information and strong-arming conglomerates to pitch in extravagant funds to foundations linked to her and Park.

“We will find out whether Choi exerted her influence in the construction process at LCT, as well,” prosecutors said.

The residential complex at the center of the probe is called LCT, a 2.74 trillion won high-rise apartment complex near Haeundae Beach. The complex gained media attention when a 320 square-meter (382 square-yard) apartment was presold last month for 6.76 billion won, a record price for Busan.

Lee, CEO of Cheongan Construction and LCT’s developer, is accused of accumulating 57 billion won in slush funds and lobbying public officials, including incumbent lawmakers, judges, prosecutors and lawyers.

He was sentenced in 2001 to two years of imprisonment with four years of probation period for embezzling funds and lobbying officials in a development project in Busan. He denied having lobbied officials then, too.

Lee was questioned by prosecutors on Nov. 11, after running from authorities for three months. He partly admitted to managing slush funds but denied lobbying officials.

“Prosecutors have not yet confirmed whether Lee lobbied officials with embezzled money,” said Yun Dae-jin, senior prosecutor of the Busan District Prosecutors’ Office.

Allegations that Lee and his associates bribed public officials surfaced as local governments lifted the 60-meter (197-feet) height restriction on structures close to the coast for the LCT; allowed LCT PFV Company, said to be owned and managed by Lee, to make LCT a residential complex, contrary to the city government’s original intention to build a tourism complex in the area; suddenly expanded the LCT’s land area from some 51,000 square meters to some 65,000 square meters; and skipped the mandatory environmental effect evaluation by the city government.

As Lee’s ties to Choi seem increasingly likely, the probe may even latch onto Posco E&C, the construction partner of LCT PFV Company, the developer of LCT. Posco E&C was chosen as LCT’s constructor after China State Construction Engineering Corporation backed out of its agreement with LCT PFV Company, signed in 2013. Lotte, Hyundai and Daelim reportedly turned down offers to work on the project.

Posco is already involved in Choi-gate over allegations that it schemed to hand over shares of its advertising company, Poreka, to Cha Eun-taek, a confidant of Choi and a TV commercials director who is accused of influence-peddling to win high-profile cultural events contracts and budgets.

The LCT scandal has been dubbed “Busan-gate” for its alleged wide-reaching involvement of public officials. The opposition Minjoo Party of Korea’s former leader, Moon Jae-in, is one of those accused of taking bribes from Lee. Moon’s political base is in Busan. Moon denied the allegations.

“I’ve criminally charged those who posted false accusations against me on the LCT corruption scandal,” Moon said in a statement on Thursday. “I will make sure such false propaganda is completely rooted out of Korea’s political scene from now on.”

President Park Geun-hye, mired in a national scandal concerning her and Choi Soon-sil, ordered a thorough investigation into Lee and the allegations on Wednesday.

Her action was largely interpreted as part of a stalling strategy to save her presidency in the face of mounting public pressure to step down.

“It makes me laugh to see the president and the Blue House ordering a thorough investigation when the president herself is mired in a corruption scandal,” said Minjoo Rep. Kim Kyoung-soo. “This is not a time when the president and the Blue House can try to hide behind LCT-gate by blowing up the other scandal.”

“Everything is working out as they planned,” said Cho Kuk, professor of criminal law at Seoul National University on his Twitter account. “Park orders a thorough investigation into the LCT scandal, and now her supporters in the administration are conveniently spreading rumors to involve the opposition party’s presidential election candidate in the scandal.”

But Lee’s alleged lobbying may involve more than a handful of politicians. The JoongAng Ilbo uncovered on Wednesday that at least three public officials received LCT apartments, which are priced from 1.1 billion to 6.7 billion won.

The officials include a close aide of Busan’s mayor, a former CEO of Busan Bank and a lawyer who was a chief judge of the Busan District Court.

Busan Mayor Suh Byung-soo’s aide assisted the mayor in his election campaign and has been appointed to a position equivalent to vice mayor. He was also an executive director at LCT PFV Company from 2008 to 2013. It was during his tenure at the company that LCT won approval from local governments to build higher than the 60-meter limit.

“As the mayor’s aide shuffled his work between the city government and LCT PFV Company,” said a CEO of a construction company, “LCT received favors and the aide ended up with an apartment from LCT.”

The aide denied the charges.

“I signed up for a presale through ordinary means,” he said, “and the first time I was not selected. But the second time I was, and I got a leftover apartment.”

Prosecutors on Thursday raided his city government office.

The former CEO of Busan Bank is also accused of taking bribes. The former CEO reportedly managed a 1.4 trillion won investment by the bank into LCT last year.

He said his wife signed up for the presale and won it after a real estate agency contacted them saying there was a leftover apartment.

The lawyer accused of corruption charges also denied them.

“I know Lee but I have never introduced him [to influential people],” the lawyer said. “LCT PFV Company contacted a bunch of public officials in Busan asking them to buy apartments in the presale, and I paid 100 million won in May and got it. There were no favors involved.”

Given that the presale sign-up rate for LCT apartments last year hit an average of 17.8 to 1, critics say it is difficult to accept that there were any “leftover apartments.”

BY JEONG JIN-WOO, YUN JUNG-MIN [chung.juhee@joongang.co.kr]


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