Lawmaker embroiled in Daejang-dong case indicted for accepting bribes

Social Affairs

Published: 23 Feb. 2022, 17:34

Lawmaker embroiled in Daejang-dong case indicted for accepting bribes

In this file photo, Kwak Sang-do, former lawmaker of the People Power Party, leaves the Seoul Central District Court on Feb. 4 after a detention warrant hearing. The prosecution detained Kwak on Feb. 5 on charges of receiving bribes from an asset company at the center of the Daejang-dong development project and indicted him Tuesday on the same charges. [YONHAP]

Prosecutors on Tuesday indicted a former opposition lawmaker accused of accepting bribes in the form of severance pay for his son from an asset firm at the center of a massive development corruption scandal.

The Seoul Central District Prosecutors' Office on Tuesday indicted Kwak Sang-do, former two-term lawmaker of the opposition People Power Party (PPP), on three counts including bribery. Kwak is the first suspect to be indicted since the prosecution launched a probe into the corruption and influence-peddling scandal surrounding the 2015 development project in Daejang-dong of Seongnam, Gyeonggi.

Over the past five months, the prosecution investigated suspected irregularities surrounding the development project. One of the allegations is that Kim Man-bae, the owner of the asset management firm Hwacheon Daeyu and the primary investor of the project, had paid or promised massive bribes to power elites, including Kwak.

Kwak was suspected of having lobbied for Hwacheon Daeyu and receiving more than 2.55 billion won ($2.14 million). The prosecution said the bribe was paid to Kwak in the form of a massive severance payout to his 31-year-old son.

Kwak's son received 5 billion won as severance payment before tax in March 2021, after five years and nine months of employment as a mid-level worker at the asset firm. The amount was more than 200 times his legally entitled severance payment.

According to the prosecution, Kwak allegedly helped Hwacheon Daeyu form a consortium with KEB-Hana Bank for the project. Hana Financial Group led the collective bid by a group of investors, including Hwacheon Daeyu, which was selected to join the mixed public-private consortium that developed the Daejang-dong area. The group together held a 50 percent stake in the project, with the Seongnam Development Corporation, the city-owned developer, holding the remaining half.

Prosecutors suspect that Kwak persuaded Hana Financial Group on behalf of Hwacheon Daeyu to stay in its existing bid after a construction company from a rival bid attempted to woo the institution to its side. Had the institution withdrawn its support for the bid, Hwacheon Daeyu would have been unable to participate in the project, where it ended up raking in a profit of 57.7 billion won ($48.3 million) since 2019 on an investment of 49.95 million won, or a 1 percent stake in the project.

In a separate but related case, Kwak was also indicted on charges of receiving 50 million won of illegal political funds from Nam Wook, a partner of the Daejang-dong development project, in 2016 before the legislative election.

Kwak has denied all charges. Since his arrest on Feb. 4, he has refused to give statements during interrogations.

"The prosecution has filed the indictment based on its imagination and assumption," Kwak's lawyer said. "The truth will be laid bare when my client goes on trial."

Kwak, 62, is a former prosecutor who later became an influential politician of the conservative main opposition party. He passed the bar exam in 1983 and served as a prosecutor until 2008. After leaving the prosecution, he practiced law as a defense attorney. In March 2013, Kwak was named the senior secretary for civil affairs of the Park Geun-hye Blue House.

In 2016, Kwak started his lawmaker career by winning a seat in Daegu for the Saenuri Party, the predecessor of the PPP. He was re-elected for a second term in 2020.

Kwak, a fierce critic of President Moon Jae-in and his family, gave up his PPP affiliation in September 2021 after his alleged involvement in the Daejang-dong scandal was revealed. He remained as an independent representative but then gave up his National Assembly seat in October 2021 after his son's massive severance payment was made public.

The far-reaching corruption scandal took place when Lee Jae-myung, presidential candidate of the ruling Democratic Party (DP), was serving as mayor of Seongnam, the site of the development project. Lee later served as the governor of Gyeonggi and won the DP's presidential nomination.

Kwak has challenged the prosecution's political integrity, insisting that other people, including Lee, should also be investigated.

"Lee has said he had designed the profit mechanism of the project," Kwak said in a press conference last year when he was announcing his resignation as a lawmaker. "Hwacheon Daeyu reportedly profited 700 billion won from the project […] It will soon be revealed who is the primary beneficiary of the project and who actually pocketed that 700 billion won."

BY SER MYO-JA [ser.myoja@joongang.co.kr]