Lee denies allegations, Moon calls for probe

Gyeonggi Gov. Lee Jae-myung, the ruling Democratic Party’s presidential candidate, on Tuesday denied allegations surrounding a housing development project and said he would use the parliamentary audit to clarify the issue.

Lee has been embroiled in controversy over a corruption scandal surrounding his reelection as mayor of Seongnam, Gyeonggi Province in 2014. 

The main opposition People Power Party has accused Lee of giving preferential treatment to asset management company Hwacheon Daeyu, which took part in a major real estate development project in Seongnam with a 1 percent stake but went on to reap enormous profits, with the company and its seven affiliates reportedly bringing in more than 1,000 times the initial investment.

Questions are being raised as to whether Lee, who had the authority to approve or refuse construction permits for the project, may have acted inappropriately to help Hwacheon Daeyu.

Speaking at a news conference organized to address the issue, Lee denied any direct involvement and said he had no authority to control prices or confiscate profits after he resigned as mayor of Seongnam in March 2018.

Lee said he would attend the parliamentary inspection of the Gyeonggi provincial government in his capacity as governor to dispel public misunderstanding and suspicion about the project.

He would use the audit as a chance to make a breakthrough, he said, although his political opponents are expected to ramp up an offensive against him over the scandal.

“I see it (the audit) as a good opportunity to elucidate the details of the Daejang-dong development project and administrative performance,” Lee told reporters during the televised interview.

But Lee admitted that bribery had taken place. He apologized for the “deviant behavior” of some of his employees, without further elaboration.

“There were around 5,000 staff under my stewardship, and I highly suspect that some of them were contaminated and involved in corruption and graft. Therefore, I can’t avoid moral responsibility as a person who had authority over personnel affairs and supervised them,” Lee said.

On the same day, President Moon Jae-in ordered a “swift and thorough investigation” to uncover the truth behind the land development scandal. Related allegations have swept through the political arena, with major figures from both the ruling and opposition blocs implicated.

In his first public statement on the issue, Moon called on police and prosecutors to cooperate to get to the bottom of the matter.

Meanwhile, former journalist and Hwacheon Daegyu chief Kim Man-bae denied the allegations facing his company. Prosecutors on Tuesday sought an arrest warrant for Kim on bribery and other charges, a day after questioning him as a suspect.

Kim, believed to be the founder and major stakeholder of the asset management company, was previously summoned and grilled by police as a witness in late September.

A key question is the identity of the true owner of Cheonhwa Dongin No. 1, which received the largest dividends among Hwacheon Daeyu’s seven subsidiaries, 120 billion won ($100 million).

Kim repeatedly denied allegations that he is not the sole and real proprietor of Cheonhwa Dongin No. 1.

“Cheonhwa Dongin No. 1 undoubtedly belongs to Hwacheon Daeyu, and Hwacheon Daeyu is my personal corporation,” Kim told reporters after the questioning session Tuesday.

Prosecutors also reportedly sought to determine whether Kim bribed the principal government decision-maker to win the land development project, in an attempt to uncover the connection between the two key figures.

Kim Man-bae has been suspected of colluding with Yoo Dong-gyu, who served as acting president of the Seongnam Development Corp. in charge of the city-run land development project.

Kim allegedly promised to share dividends and pay 70 billion won to Yoo, who has been arrested on charges of breach of trust and bribery.

South Korean news outlets also pointed to Yoo as the real owner of Cheonhwa Dongin No. 1, citing the testimonies of concerned persons.

After interviewing Lee, former reporter Kim founded Hwacheon Daeyu a week before a private-sector tender for the project kicked off.

But Kim rebuffed the allegation that his company’s funds could have been used for corporate lobbying, including the payment of legal fees to help clear then-Mayor Lee of violating the election law.

“No illegal funds have been transacted. I believe many of the suspicions that have been raised will be resolved if the prosecution thoroughly investigates fund transactions including account tracking,” Kim told reporters upon arriving at the Seoul Central District Prosecutors’ Office on Monday.

Since late September, prosecutors have summoned and investigated people involved in its widening probe into the snowballing land development scandal.

By Ji Da-gyum (dagyumji@heraldcorp.com)