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Fund fraud scandal spills over to prosecution

Rift opens between prosecution, Justice Ministry over illegal lobbying allegations

  • Published : Oct 18, 2020 - 17:05
  • Updated : Oct 18, 2020 - 18:00
A statement from Kim Bong-hyun, a key suspect in a financial fraud scandal involving Lime Asset Management, released on Friday provided by the Star Mobility owner`s defense attorney. Kim claimed in the statement that he has lobbied ranking prosecutors, one of whom is now part of the investigative team. (Yonhap)
A financial fraud scandal involving a private equity investment company has spilled over to the prosecution after a key suspect claimed to have lobbied ranking prosecutors, one of whom is now part of the investigative team.

The revelation added fuel to the political debate surrounding the country’s law enforcement authority, which the Moon Jae-in administration has openly criticized for wielding “uncontrolled” power and has vowed to reform.
It also ripped open a rift between the prosecution and its oversight body, the Justice Ministry, which have been at odds over the reform issue as well as some politically sensitive cases.

Prosecutor General Yoon Seok-youl on Sunday rebutted the Justice Ministry’s statement that the probe by the Seoul Southern District Prosecutors’ Office into the Lime Asset Management’s hedge fund scam was “insufficient,” and that prosecutors had failed to properly look into the testimony of the suspect concerning the alleged illegal lobbying.

Following Justice Minister Choo Mi-ae’s directive, the ministry questioned Star Mobility owner Kim Bong-hyun, who on Friday claimed to have thrown a drinking party, worth 10 million won ($8,750), for former and incumbent prosecutors last year to buy favors. He also said he had offered billions of won in bribes to a prosecutor-turned-opposition politician.

Kim, under arrest since April on embezzlement charges, is alleged to have played a key role in the fund scandal, in which Lime is alleged to have covered up massive losses and subsequently suspended fund redemption worth around 1.6 trillion won.

In the Friday statement, which Kim released via his lawyers, the suspect said prosecutors coerced him to give testimony that would implicate ruling party politicians. The pressure on him intensified after chief prosecutor Yoon’s directive, he said.

Prosecutors mentioned in the statement immediately denied wrongdoing. Chief prosecutor Yoon on Saturday ordered a thorough investigation into the accusations.

Opening fire at the prosecution, the Justice Ministry said Sunday, “Even though the prosecutor general was directly involved in appointing prosecutors to investigate the Lime scandal and promised comprehensive investigation, there is a suspicion of (the prosecution) failing to thoroughly look into the lobbying of prosecutors and an opposition party politician.”

Yoon’s office immediately denied the claims, saying the ministry is accusing the prosecutor general of wrongdoing with no supporting evidence.

“The announcement from the Justice Ministry is totally groundless, and it is an attempt to slander the prosecutor general,” the Supreme Prosecutor’s Office said in a statement. “The announcement is entirely difficult to accept.”

The prosecution added that it is conducting its investigation into the financial fraud scandal in accordance with laws and principles and is following up on Kim’s Friday allegations as well.

The emergence of the new allegations ratcheted up political bickering between the rival parties. This time, the ruling Democratic Party went on the offensive.

“If Kim’s statement turns out to be true, this case is very shocking, as it would exemplify the prosecution’s tendency to choose and devise investigations as they need,” said Democratic Party spokesperson Rep. Kang Sun-woo in a briefing Friday. He urged the Justice Ministry to thoroughly check on the overall progress of the Lime scandal investigation and exempt involved prosecutors from their duties.

Kang added that the case shows why prosecution reform is needed, and illustrates the need for an independent body to specialize in investigating corruption cases involving high-level government officials. Both prosecution reform and the creation of a new investigative agency are opposed by the rival People Power Party.

Floor Leader Joo Ho-young of the conservative main opposition party said Sunday that his party would push for a parliamentary investigation into the Lime fund scandal, claiming that influential figures from the incumbent administration may have been involved.

Some in the prosecution also raised questions about the motive behind Kim’s statement, which appears to have turned the tables in favor of the ruling party just as it is under increasing attacks from the opposition. Kim’s allegations appear to help build a case for the establishment of the new independent investigative agency.

“(The Friday testament) smells like a forged work from Kim Bong-hyun and someone else, as there are many suspicious parts within the statement,” said Kim Jong-min, a former head prosecutor of the Suncheon branch of the Gwangju District Public Prosecutors’ Office, in a social media post Friday.

Kim said the statement provided ammunition to the ruling party before the annual parliamentary audit of the Seoul Central District Prosecutors’ Office on Monday and the Supreme Prosecutors’ Office on Thursday.

“Prosecutors assigned to the Lime scandal would be the aces of the best, and it is hard to imagine that they would have accepted a drinking party from a sloppy guy like Kim Bong-hyun.”

By Ko Jun-tae (ko.juntae@heraldcorp.com)

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