Corruption investigation at POSCO widening to probe of illegal political funding

Posted on : 2015-09-11 16:08 KST Modified on : 2019-10-19 20:29 KST
A number of figures related to the administration of Lee Myung-bak reportedly used funds to wield political power
 Sep. 10. (Yonhap News)
Sep. 10. (Yonhap News)

The investigation into allegations of corruption at POSCO, which had focused on internal corruption at the company for more than six months, is rapidly turning into an investigation of illegal political funds aimed at heavyweights in the administration of former president Lee Myung-bak (2008-2013).

The shift is a reaction to the recent discovery that illegal political funds were being delivered through funneling work to subcontractors. Several members of the so-called “Yeongpo Clique,” referring to influential figures with connections in Pohang, appear to be the target of the prosecutors’ investigation.

“We have at last figured out the specific means by which POSCO offered concessions and built relationships with political and government figures from the region. An addition investigation of POSCO subcontractors will continue for the time being,” said a source with the prosecutors on Sep. 10.

Prior to this, the prosecutors had mainly been pursuing clues that executives and staff at POSCO E&C had created a slush fund, but these remarks appear to suggest that the focus of the investigation has shifted to political funds delivered through subcontractors for POSCO’s main office.

The second special division at Seoul Central District Prosecutors’ Office, led by Cho Sang-jun, is wrapping up its investigation of charges of preferential contracts given to TM Tech. The real owner of TM Tech was an individual surnamed Park, who happened to be a close associate of Lee Sang-deuk, 80, former Saenuri Party (NFP) lawmaker and older brother of Lee Myung-bak.

The prosecutors have reportedly acquired evidence showing that Park, who ran Lee Sang-deuk’s office in the Pohang area, collected around 2 billion won (US$1.69 million) in dividends and used 1.5 billion won of this to pay for the costs of running the office.

Prosecutors are planning to call in Lee Sang-deuk for questioning as early as next week on suspicion of violating the Political Funds Act.

The second target of the prosecutors is a cleaning company known as E&C. The president of this company, an individual surnamed Han, 63, was the head of a fan club for Lee Myung-bak, the so-called MB Alliance. Han is understood to be a confidante of Lee Byeong-seok, 63, a Saenuri lawmaker from the North Pohang District and former deputy speaker of the National Assembly.

Another interesting connection here is the 7,000 Club, said to consist of politicians from the Pohang area.

According to sources in law enforcement and at POSCO, the 7,000 Club is a group of seven people from Pohang who wielded influence on regional politics. Allegedly, the seven members raised money from POSCO subcontractors, pooling 10 million won each per month for a total of 70 million won, and gave a substantial amount of this money as bribes to powerful figures in the Lee Myung-bak administration.

“There was a group called the 7,000 Club that was composed of key political figures from the region, including Lee Sang-deuk. If the prosecutors say that they’re taking aim at unethical relationships between POSCO and regional politicians, they’re probably focusing on the 7,000 Club,” said one source, at POSCO who is familiar with the situation in the Pohang area.

Park and Han, the owners of TM Tech and E&C, which the prosecutors have already raided, are both reported to belong to the 7,000 Club.

“We recently received intelligence about the 7,000 Club and are following up on the lead,” a source at the prosecutors said.

In related news, the prosecutors called in former POSCO CEO Chung Joon-yang on Sep. 3, Sep. 9, and Sep. 10, focusing their questions on allegations that projects were shunted to subcontractors connected with Lee Sang-deuk and others. The prosecutors have reportedly received testimony from current and former executives and staff at POSCO to the effect that Chung gave jobs to TM Tech and E&C.

After a few more rounds of questioning Chung, the prosecutors intend to decide whether to ask the court for an arrest warrant.

By Noh Hyung-woon, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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