Prosecutors close in on Busan construction head

After four days of questioning Lee Young-bok, CEO of Cheongan Construction and developer of a lavish apartment complex off the coast of Busan’s Haeundae District, who is accused of accumulating some 57 billion won ($48.8 million) in slush funds and lobbying public officials, prosecutors uncovered traces that Lee may have made it all possible by cooking the books through about 10 subcontractors.

Lee was apprehended on Saturday after being on the run for three months. “We have determined much of where Lee used the embezzled money,” said Yun Dae-jin, a senior prosecutor at Busan District Prosecutors’ Office. “But we cannot yet reveal it to the public.”

Lee admitted partly to his embezzlement charges, but denied lobbying officials. “I used the money to drink and eat with people I know,” Lee told prosecutors. “I did not lobby officials.”

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 Miami Beach of Korea.

What complicates the probe is that the shares of LCT PFV Company, the developer of LCT, are held by 20 companies.

Four of them are investment banks, five are conglomerates, eight are companies based in Busan and three, including Cheongan Construction, are spearheading the project. Cheongan Construction holds a 27 percent share in LCT, the largest among the 20 companies.

Lee is the owner and developer of the LCT, according to those involved in the construction.

“Lee holds no shares of LCT officially,” said an official of LCT PFV Company. “But he is the owner of LCT PFV Company and is managing the construction deal.”

Lee holds at least 150 billion won in debt from when he spearheaded a development project in Busan in 1996. Also accused of influence peddling with embezzled funds at the time, Lee was summoned by prosecutors in 1999, when he went on the run for two years.

He then turned himself in and was sentenced to two years for corporate malpractice and embezzlement and four years of probation period. He denied throughout the probe all charges of influence peddling and lobbying. Lee’s credit standing bars him from making financial transactions.

Prosecutors suspect Lee embezzled the funds via subcontractors working with Cheongan Construction and other companies that he is alleged to control from behind the scenes.

For instance, prosecutors found that in 2009, Lee’s Cheongan Construction bought an architectural firm and signed a contract with LCT under the name of the firm. Cheongan Construction would then take the investments received by the firm and use them.

In this process, Lee allegedly cooked the books to receive larger investments than were needed and embezzled them. In 2015, Lee also won fees from trust companies by faking larger than actual pre-sale deals.

Some 600 million won in embezzled funds were used to pay for four apartments in LCT that Lee bought under his relatives’ names, according to prosecutors.

BY HWANG SUN-YOON, ESTHER CHUNG [chung.juhee@joongang.co.kr]