Lee charged in Busan-gate but only for embezzling

Cheongan Construction CEO Lee Young-bok, the center of a major real estate bribery scandal in Busan, was indicted Monday but only on embezzlement charges and violations of the Housing Act.

Lee was indicted Monday for allegedly embezzling 70.5 billion won ($60.1 million).

“Prosecutors confirmed that Lee used the embezzled funds personally, and in managing Cheongan Construction and other affiliated companies,” said senior prosecutor Yun Dae-jin in a press briefing on Monday. “But prosecutors could not track down where Lee used some billions of won that he embezzled.”

Even after raiding 14 country clubs and three hostess bars that Lee frequented, prosecutors came up empty-handed in trying to probe if Lee used the money to lobby for permission to build a luxury development near Haeundae Beach in Busan.

The quest to discover whether Lee lobbied a public official with funds he embezzled may lie in the questioning of Hyun Ki-hwan, former senior presidential secretary. Hyun has been summoned to appear before prosecutors today under the suspicion that he took bribes from Lee and helped him lobby officials. His office was raided last week.

“Prosecutors cannot confirm right now whether Lee paid bribes to former senior presidential secretary Hyun Ki-hwan,” Yun said. “More investigations will have to follow.”

Yun refused to comment on how much Hyun is alleged to have received from Lee.

Prosecutors suspect Hyun - who was a senior presidential secretary for President Park Geun-hye from July 2015 to last June - may have received bribes from Lee and helped him 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 the Busan Bank.

Lee’s past prevents him from receiving financial funding. He incurred some 150 billion won debt from a development project in Busan in 1996.

Hyun is also accused of helping Lee lobby Posco E&C because it agreed to take on the LCT construction project after other conglomerates turned it down. Posco E&C agreed to be the LCT’s builder after China State Construction Engineering Corporation backed out of an agreement with LCT PFV Company signed in 2013. Lotte, Hyundai and Daelim reportedly turned down offers to work on the project.

Hyun is also accused of connecting Lee with Busan city government officials, who allegedly pulled the strings to allow LCT to circumvent city regulations. Prosecutors also charged Lee with violating the Housing Act by preselling 43 apartments in LCT to his relatives unfairly, and scheming with an accomplice to fake the sale of 127 apartments to drive up prices.

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