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Kim Seong-tae, the former chairperson of Ssangbangwool Group who was arrested in Thailand while a fugitive from the Korean law is transferred to Korean law enforcement at Incheon International Airport on Jan. 17. (pool photo)

The South Korean prosecutors’ investigation of the Ssangbangwool Group was two-pronged. One prong was the suspicious flow of funds potentially linked to corruption by former group chairperson Kim Seong-tae, and the other was allegations that the group had paid legal fees on behalf of Lee Jae-myung, former governor of Gyeonggi Province and currently head of the main opposition Democratic Party.

But since the investigation picked up speed following Kim’s return to Korea, the main issue of embezzlement and breach of trust at the Ssangbangwool Group has been tied up with secondary allegations about the proxy payment of Lee’s legal fees and a transfer of funds to North Korea. And it seems possible that those secondary allegations will eventually overshadow the primary ones.

The two prongs of the investigation had different starting points. The investigation into funds at the Ssangbangwool Group began when the Korean Financial Intelligence Unit informed the Supreme Prosecutors’ Office about evidence of suspicious transactions at the group in February 2022.

Even at that point, the investigation wasn’t obviously connected to Lee. The investigation was entrusted to the sixth criminal division of the Suwon District Prosecutors’ Office.

Then in May 2022, there was a leak in the Ssangbangwool Group investigation. An investigator with the sixth criminal division was caught passing search warrants for group bank accounts to a member of the group board who had formerly served as an investigator for the prosecution service.

The leak was turned up coincidentally. The public investigation department at the Suwon District Prosecutors’ Office, which was looking into the proxy payment allegations, stumbled upon the leaked documents while raiding the legal firm accused of making the payment.

The documents were found in the office of an attorney and former employee with the prosecution service who was serving as an outside director for the Ssangbangwool Group. That was the moment when the two separate investigations were linked under the keywords of “Lee Jae-myung” and “Ssangbangwool.”

Following the leak of confidential material about the investigation, prosecutors began conducting the two investigations in tandem.

The allegations about transferring funds to North Korea were raised abruptly toward the second half of last year. The prosecutors came upon evidence that North Korea was the ultimate destination of some of the Ssangbangwool funds they’d been tracking.

The prosecutors paid special attention to the role of Lee Hwa-young (currently in detention), who had been in charge of North Korean exchange projects while serving as vice governor of Gyeonggi Province. Before assuming that post, Lee Hwa-young had served as the outside director of the Ssangbangwool Group for more than a year, beginning in March 2017.

In short, investigators had found another link between the Ssangbangwool Group and Gyeonggi Province.

After expanding the scope of their investigation into Gyeonggi Province’s North Korean projects, prosecutors learned that the Asia-Pacific Peace Exchange Association, which had been running North Korean exchange programs with subsidies from Gyeonggi Province, had received hundreds of millions of won in donations from the Ssangbangwool Group. Prosecutors also turned up evidence that association head Ahn Bu-su (who is detained, facing charges) had delivered US$500,000 to a senior official in North Korea and that multiple Ssangbangwool executives had smuggled large quantities of US dollars to China around the same time.

After being apprehended in Thailand on Jan. 10, former Ssangbangwool Chairperson Kim Seong-tae voluntarily returned to South Korea a week later on Jan. 17. The investigation has been gathering steam since then.

Prosecutors arrested and indicted Kim last Friday on charges involving embezzlement in violation of the Act on the Aggravated Punishment of Specific Economic Crimes, as well as violations of the Capital Markets Act and Foreign Exchange Transactions Act.

One of the accusations that emerged in the process alleges that he smuggled a total of US$8 million out of South Korea between January and December 2019 to pay smart farm costs and other expenses in North Korea.

After previously maintaining that Lee Jae-myung knew nothing, Kim reportedly delivered an explosive account to the prosecutors, claiming that US$3 million of the smuggled funds has to do with plans for a visit to North Korea by Lee. His account seems to point the direction for the prosecutors’ investigation of Lee.

Some legal world analysts suggested the prosecutors may be seizing on the North Korean money issue in order to pursue “third-party bribery” charges against Lee Jae-myung. In other words, they view Ssangbangwool as having passed funds along to North Korea for the sake of Lee’s political activities — in what they see as a similar framework to the Seongnam Football Club situation.

For the charges to be applied, it would need to be established that Lee was aware of Ssangbangwool’s delivery of the funds to North Korea, and that some clear connection existed between Lee and Kim.

Indeed, prosecutors have identified former Gyeonggi Vice Gov. Lee Hwa-young as a link between Lee and Kim. In particular, they acquired a statement from Kim that on two occasions in 2019, he connected Lee Hwa-young with Lee Jae-myung by telephone while with the former.

In a recent letter from prison, Lee Hwa-young disputed the claims.

“Kim Seong-tae’s statement to the prosecutors claiming that he delivered dollars to North Korea for the sake of Gyeonggi Province or Lee Jae-myung is a complete fiction,” he said.

Having previously targeted Lee Jae-myung with allegations of proxy attorney payment, the prosecutors have now switched the course of their investigation to explore the alleged transfer of funds to the North.

For now, however, all they have are conflicting accounts and claims. In other words, they have not made any concrete evidence public.

Lee has insisted that he “thought it was crazy for them” to attempt to indict him on charges of proxy attorney payment.

“There isn’t a single fact here,” he said.

By Lee Jung-ha, Incheon correspondent

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