Hyun Ki-hwan to be questioned over Busan-gate scandal

Prosecutors will summon for questioning next week Hyun Ki-hwan, former senior presidential secretary, on suspicions that he pulled strings behind the scenes for Lee Young-bok, CEO of Cheongan Construction, who is detained on charges of embezzlement and lobbying public officials, including prosecutors and Blue House officials.

Lee is accused of running some 57 billion won ($48.2 million) in slush funds and lobbying public officials to get permission to build a high-rise residential and commercial complex near Haeundae Beach in Busan. The construction of LCT, currently ongoing, is to cost a total of 2.74 trillion won. Lee was nabbed on Nov. 12 after being on the lam for three months, and has denied all lobbying allegations.

Hyun, who was a senior presidential secretary for President Park Geun-hye from July 2015 to last June, was named a suspect last week by prosecutors and was banned from leaving the country.

“We found evidence against Hyun when we traced the whereabouts of the slush funds,” said Yun Dae-jin, a senior prosecutor of the Busan District Prosecutors’ Office. “We are currently examining the laptop and phone that we seized from his house on Tuesday.”

Prosecutors suspect Hyun may have received bribes from Lee and helped Lee win a contract with Posco E&C in July last year as well as sign a 1.78 trillion won project-financing contract with financial institutes associated with the BNK Financial Group, including Busan Bank. Prosecutors questioned Tuesday former President and CEO of Posco E&C Hwang Tae-hyun and a loan officer at the Busan Bank on corruption allegations.

Hyun and Lee are said to have been close acquaintances. Reports surfaced that Lee hung out with Hyun at a hostess bar in Gangnam, southern Seoul, and that when Lee was on the lam, he asked Hyun to call off the prosecution investigation.

The Lee scandal has been dubbed “Busan-gate.”

Prosecutors see Hyun as a crucial figure who allegedly provided a lobbying network for Lee. Hur Nam-sik, who was mayor of Busan from 2004 to 2014, employed Hyun as a special economic advisor. Hur was also in office when the city government made exceptional allowances to LCT for the project, lowering height restrictions and other regulations. Hur is suspected to have changed the regulations after receiving bribes from Lee.

Suh Byung-soo, current mayor of Busan, is also suspected to have had a hand in the scandal. His Special Economics Advisor Jung Gi-ryong, who recently resigned, was discovered to have been a financial director of the LCT construction project from 2010 to 2013 before his post at the city government.

An exclusive report by the Maeil Business Newspaper on Wednesday cited a list of officials who were treated to golf outings by Lee when he was looking for partners and lenders for the LCT construction project. The list included Jung Gi-ryong, who was reportedly treated to golf outings by Lee 13 times from 2012 to 2014, including four times after he began his tenure at the city government.

The list also included two vice mayors of the Busan city government, a former head of Busan Bank, and former CEO of Posco E&C Hwang.

Prosecutors on Thursday raided the home of the head of a shell company established and managed by Lee. Lee is alleged to have used shell companies to borrow money from banks, since he still carries some 150 billion won in debt from a development project in Busan in 1996. In 2001, Lee was sentenced to two years in jail for corporate malpractice and embezzlement.

Prosecutors plan to indict Lee on Monday on charges of embezzlement and fraud, and said the investigation into the Busan-gate, including the lobbying allegations, will continue after Lee’s indictment.

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