Posco probe shines light on search, seizure limits

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Posco probe shines light on search, seizure limits

Just a day after former Prime Minister Lee Wan-koo declared a war against corruption in March, prosecutors launched an investigation into Posco Engineering and Construction (E&C) over accusations that it had allegedly created colossal slush funds in Vietnam and engaged in questionable merger and acquisition deals.

The raid sent jitters through the local business arena, with Korea’s conglomerates fearing the probe could just be the beginning of a series of investigations into business irregularities.

Some 20 subcontractors and subsidiaries have been raided since March 13, when Seoul prosecutors stormed into the Incheon headquarters of Posco E&C. About 100 people were summoned and 17 were detained on embezzlement charges.

However, requests for an arrest warrant for former Posco E&C Vice President Chung Dong-hwa were twice rejected due to a lack of evidence, and prosecutors have had even more difficulty reaching his supervisor and their main target, former Posco Chairman Chung Joon-yang.

“The probe was never narrowed down onto Chung, but rather, the entire Posco Group and its subcontractors,” said a source from the prosecution’s investigation team, brushing off speculation that officials were at a dead end.

Yet, some corporate experts think differently.

“If the prosecutors fail to find evidence to support an allegation, they need to know when to pull the brakes on their investigation,” said Kim In-ho, chairman of the Korea International Trade Association. “When you’re dealing with companies, you must confront them with strong evidence and keep the investigation as short as possible.”

A number of Posco executives have complained about the difficulty of trying to handle operations in the midst of an ongoing probe, pointing to plummeting credit ratings from abroad.

But in attempting to explain why the prosecution has fumbled in the case involving the global steelmaking giant, legal analysts cited the abrupt change in the work environment at the prosecution since 2013, when its investigative authority was restructured and disseminated from the Central Investigation Unit in the Supreme Prosecutors’ Office to lower-level bureaus.

Another hurdle is a recent verdict handed down by the Supreme Court, which ruled that collecting data undetailed in a search warrant is illegal.

If investigators overlook that guideline, it added, all confiscated information will be nullified.

The ruling last month sparked controversy in the legal field, and prosecutors argued that it was nearly impossible for them and investigators to personally look through each and every storage device seized during a corporate raid to make sure only data specified in the search warrant was collected.

The decree fails to reflect the reality of their work, prosecutors say, especially with most company records digitalized on data storage devices.

“It’s problematic that prosecutors think they will eventually catch something if they keep digging,” said Lee Chang-su, who heads the Institute for Law and Human Rights in Society.

If they are dealing with a politically motivated subject, in particular, the probe should be based on tangible accusations, he added.

The prosecution believes Posco was granted favors from the previous Lee Myung-bak administration, with many of the conglomerate’s businesses overseas aligned with government projects. Chung is thought to have connections to Lee, who was president in Jan. 2009, when Chung was appointed as Posco chairman.

Another candidate for the position, Yoon Seok-man, the president of Posco at the time, also disclosed in a hearing later that Lee’s key aides had pressured him to withdraw his candidacy for the chairmanship.

Citing the plain view doctrine of the United States, which allows officers to seize evidence at a crime scene without a search warrant, Rho Myung-sun, a professor in Sungkyunkwan University Law School, stressed it was time for Korea to implement a similar policy.

BY KIM BAEK-KI, LEE YU-JEONG [lee.sungeun@joongang.co.kr]
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