Ripples from 4 rivers scandal spread

Prosecutors have begun digging deeper in their quest to track dirty money that allegedly changed hands between construction companies colluding on the Lee Myung-bak administration’s controversial four-rivers restoration project.

The Seoul Central District Prosecutors’ Office Special Investigation Unit No. 1 sought a warrant on Monday to detain Kim Young-yoon, 68, the head of the nation’s top engineering consulting firm, Dohwa Engineering, on suspicion of embezzling hundreds of billions of won of company money since 2008, when the firm participated in the four-rivers restoration project.

The river renovation was pitched as being aimed at restoring the areas surrounding the country’s four major rivers - the Han, the Geum, the Yeongsan and the Nakdong - at a cost of 22 trillion won ($19.7 billion). Around three months ago, prosecutors conducted massive coordinated raids on the offices of big construction conglomerates over allegations they colluded to win bids for the project.

Prosecutors said they have secured testimony about Dohwa’s violations while questioning company officials over the past three months. Executives said slush funds were created not just by the chief, but systematically by the firm. The Seoul Central District Court will decide whether a warrant should be issued for Kim’s arrest today. He was summoned and questioned last week.

The prosecution accuses him of using embezzled funds to bribe construction conglomerates participating in the river project into giving Dohwa the design contract for the Haman Reservoir on the Nakdong River.

“In June, a Dohwa official testified that about 400 million won cash was given to Daewoo Construction,” a prosecution spokesman told the JoongAng Ilbo.

On July 31, the investigation team summoned and questioned former Daewoo CEO Seo Jong-uk, and he admitted to taking the bribe.

After obtaining the contract, Dohwa made a meteoric rise, becoming the No. 1 civil engineering company. It obtained many government-issued construction projects over the last five years, raising suspicious that it was being favored by the former administration.

Dohwa successfully kept its top rank in the field until 2011, raking in 322 billion won in 2010, but it was ordered to pay a 5 billion won fine last year for tax evasion.

Prosecution sources said the investigation team has already identified the circumstances under which the big construction firms colluded to win the bids and divvy up the project. They then distributed different aspects of the work, including design and safety inspections, to subcontractors like Dohwa, prosecutors say.

In mid-May, the prosecution sent nearly 200 prosecutors and investigating officers into 25 offices of construction companies including Hyundai Engineering and Construction, Daewoo Construction, Posco E&C and GS Construction, collecting computer hard disks, accounting books and relevant documents.

They are also investigating allegations that 12 incumbent and former executives of Hyundai Engineering and Construction embezzled company funds.

BY SHIM SAE-ROM, KWON SANG-SOO [sakwon80@joongang.co.kr]