BBK TO HAUNT PRESIDENT-ELECT LEE?

C O N F I D E N T I A L SEOUL 003555

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/10/2014
TAGS: KN KS PGOV PREL PINR
SUBJECT: BBK TO HAUNT PRESIDENT-ELECT LEE?


Classified By: POL Joseph Y. Yun. Reasons 1.4 (b,d).


1. (C) Summary: It does not look like Lee Myung-bak's
political problems will be over with his presidential
election victory in two days. On December 17, the National
Assembly convened to approve the appointment of a special
prosecutor to look into allegations that Lee was involved in
BBK's stock manipulation scheme. The whole BBK affair
received unexpected traction over the weekend with the airing
of a video clip, made in 2000, that showed Lee stating that
he had established the investment firm BBK, something he has
categorically denied since the start of the presidential
election campaign. In response to the video clip, President
Roh requested that the Prosecution reinvestigate the case,
which in turn prompted Lee Myung-bak to agree to the
appointment of a special prosecutor by the National Assembly.
Speculation abounds over what might happen to
"President-elect" Lee should the special prosecutor decide to
indict him, because there is no constitutional protection for
a president-elect. Pundits are unanimous, however, in the
view that the special prosecutor will not be able to finish
his investigation before the inauguration on February 25.
By that time, it will be "President" Lee, removable by
impeachment only. End Summary.

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December 5 Prosecution Report
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2. (SBU) On December 5, the Seoul Prosecutor's Office
announced that Grand National Party (GNP) candidate and
presidential frontrunner Lee Myung-bak was clear of suspicion
in the BBK stock manipulation scandal (reftel). The
prosecutor's office reported that they found no evidence
supporting allegations that Lee co-owned the BBK asset
management company with Christopher Kim (aka Kim Kyung-joon).
Following the announcement, Lee's lead in the polls
increased, mostly at the expense of conservative rival Lee
Hoi-chang, who entered the race specifically to pick up the
conservative mantel should Lee Myung-bak be found guilty in
the stock manipulation scheme and be forced out of the race.

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UNDP Fights Back
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3. (SBU) Despite the prosecutor's report, the United New
Democratic Party (UNDP) and other rivals vowed to continue to
fight to unearth Lee Myung-bak's connection to the scandal.
The UNDP last week convened a special session of the National
Assembly to vote on proposed legislation to impeach the ROK
Prosecutors involved in the BBK affair. UNDP legislators
charged that the ROK Prosecutors overlooked GNP presidential
candidate Lee Myung-bak's role in the various criminal
offenses committed by BBK owner Christopher Kim.


4. (SBU) The GNP responded to the UNDP's efforts on December
14 by physically blocking UNDP members from taking the
speaker's podium in the National Assembly, thus preventing a
vote. The GNP first used a lead pipe to bar the doors of the
Assembly, and, when workers sawed through the pipe, a tussle
ensued as UNDP lawmakers tried to overcome the GNP
representatives who were blocking the podium. To quell the
violence, the Assembly Speaker intervened and said further
discussion would take place December 17. The impeachment
bill was thus automatically voided when it was not acted upon
within 72 hours after introduction to the National Assembly.


5. (SBU) The UNDP on December 16 intensified their fight
against Lee Myung-bak at a press conference by airing a video
of a speech Lee Myung-bak gavein October 2000 in which he
states that he "established BBK." Following release of the
video, President Roh Moo-hyun weighed in and instructed the
Ministry of Justice to consider re-investigating the BBK case
if the UNDP's special prosecutor bill failed to pass the
National Assembly. In response to Roh's announcement, Lee
Myung-bak announced at a midnight press conference that would
accept the decision to appoint a special prosecutor as long
as the bill passed through the National Assembly, "according
to normal rules and procedures." The following day the
Ministry of Justice announced it would also accept the
special prosecutor, but not re-investigate the case itself.
Meanwhile, the UNDP continues to call for the resignation of
Lee's candidacy for president. The special prosecutor's bill
was passed on December 17 with the support of all 160
lawmakers from the UNDP, Democratic Labor Party (DLP),and
Democratic Party (DP),while the GNP lawmakers boycotted the
vote.

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Timeline for the Special Prosecutor
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6. (SBU) Following the passage of the Special Prosecutor's
bill it will take at most 72 days until the prosecution
completes its investigation. The President has to promulgate
the law within 15 days and the special prosecutor will be
appointed within an additional 10 days. Another seven-day
preparation period will be given, and the investigation will
last 30 days, with a possible 10-day extension available.
According to the schedule specified by the UNDP's special
prosecutor bill, the investigation could be finalized before
the Presidential Inauguration on February 25.

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President-Elect Vulnerabilities
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7. (SBU) The potential problems created if an investigation
finds a connection between Lee and the BBK case are
unprecedented as the Korean Constitution does not
specifically define the legal status of a president-elect.
The President's rights are clearly defined in regards to
legal implications and Article 84 of the Constitution says,
"Except when she/he is implicated with civil or external
warfare, the President shall not be subject to a criminal
prosecution during his/her term in office." No such immunity
provision exists, however, for a president-elect.
Theoretically, a president-elect may be both summoned and
indicted by a special prosecutor. Problems arise because,
without any precedent, opinions vary widely over whether a
president-elect should be subject to criminal prosecution.
Article 68 Paragraph 2 of the Constitution states, "In case
of the occurrence of a vacancy in the Presidency, or in case
the President-elect is disqualified due to death, a court
ruling, or any other reason, then a replacement shall be
elected within 60 days." Article 192 of the Election Law
makes the provision that if an elected official loses his/her
eligibility for election before the term begins, then the
election outcome becomes null and void. In such a case, the
Constitution provides that a by-election is to be held.

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Possible Post-Election Scenarios
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8. (SBU) If Lee Myung-bak is elected, he will be the first
president-elect to be investigated by a special prosecutor.
Should the special prosecutor rule that Lee was involved in
the BBK case after the inauguration, it would undermine what
little moral credibility Lee retains. It would also create
problems as he seeks to form his first cabinet and could
hamper policy initiatives. If the special prosecutor indicts
Lee before his inauguration, he would become a suspect in a
criminal case. These scenarios, however, would not deprive
Lee of his president-elect status before the court's final
ruling, which would inevitably take another several months
after the criminal indictment. Even if the UNDP files a
lawsuit to invalidate Lee's election, this too would need the
court's final ruling in order to deprive Lee of his position.
Any issues not clearly specified in the law would likely be
sent to the Constitutional Court for interpretation.


9. (SBU) While the UNDP likely realizes that it cannot
change what appears to be an inevitable loss in the
presidential election, they are most likely focusing their
energies on the National Assembly elections in April. Even
if Lee Myung-bak is not indicted by the special prosecutor,
the blow to Lee's moral credibility will probably help
strengthen the liberals' position in the run-up to the 2008
general elections. Han Gwi-young, a pollster at the Korea
Society Opinion Institute (KSOI) offered her analysis in a
media interview, "Even if the trend is not reversed in the
remaining run-up to the presidential election, the UNDP might
benefit from the narrowed gap to gain ground as a stronger
contender in the metropolitan region in the National Assembly
elections."

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Comment
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10. (C) While the recent attempts by the UNDP to further
discredit Lee will probably have little influence on the
outcome of the election overall, they may present
unprecedented legal issues should Lee win December 19.
Although presidential candidates are not subject to criminal
charges during the campaign period, no such exemptions are in
place for the president-elect. If the special prosecutor
connects Lee to the BBK case before the February 25
inauguration, it may be a catalyst for constitutional reform
because no precedents exist to deal with the situation. If
connections are made following the inauguration, it will no
doubt wreck havoc on the early weeks and months of Lee's
presidency.
VERSHBOW