BIG NAMES IMPLICATED IN UNFOLDING BIPARTISAN

C O N F I D E N T I A L SEOUL 000498 SIPDIS E.O. 12958: DECL: 03/27/2019 TAGS: KS KN PGOV PREL SUBJECT: BIG NAMES IMPLICATED IN UNFOLDING BIPARTISAN BRIBERY SCANDAL Classified By: POL Joseph Y. Yun. Reasons 1.4 (b,d). ¶1. (C) SUMMARY: Korea's latest political corruption scandal, slowly growing for months, picked up speed this week with the arrest of Democratic Party (DP) lawmaker Lee Kwang-jae and summonses issued for a number of politicians including Grand National Party (GNP) lawmaker Park Jin. The allegations revolve around a Busan businessman, Park Yeon-cha, and his alleged illegal campaign contributions and bribes to some of Korea's most powerful politicians and tax and law enforcement officials. At first the investigation appeared to be focused on politicians close to former President Roh Moo-hyun, but the scope of the investigation has expanded to as many as 70 politicians from both sides of the political divide, including some close to President Lee Myung-bak. How culpable many of the accused -- including Foreign Affairs Committee Chair Park Jin -- are remains unclear, but these allegations will not soon be put to rest and will likely unsettle the National Assembly -- and Korean politics -- for some time. END SUMMARY. -------------- Background Notes on a Scandal -------------- ¶2. (SBU) The scandal started in the summer of 2008 with a tax probe into Busan-based shoe manufacturer Taekwang Industrial and its Chairman Park Yeon-cha, who made his fortune by supplying athletic shoes to Nike. In July, tax investigators raided Park's office and confiscated confidential documents and account books. One of Park's secretaries provided details on his meetings, telephone conversations, and secret deals with some of the country's most influential men. Also uncovered was a document recording a loan of 1.5 billion Korean won from Park to former President Roh Moo-hyun. In November the National Tax Service handed the case over to prosecutors, asking that Park be indicted for tax evasion and insider trading. -------------- Progressives Fall First -------------- ¶3. (SBU) As the investigation progressed, aides to former president Roh Moo-hyun were implicated, and Park is now believed to have been one of Roh's major financial sponsors; the two men hail from Busan and have been close associate for decades. On March 25, prosecutors arrested Roh's former Vice Minister of Public Administration Chang In-tae for allegedly taking 800 million won (USD 587,251) in illegal political funds from Park for Chang's 2004 South Gyeongsang Province gubernatorial bid. Park claimed that Roh's elder brother, Roh Gun-pyeong (also under arrest),called Park to request assistance with Chang's campaign. On March 23 Roh's former Senior Secretary for Civil Affairs Park Jung-kyu was detained for questioning and later placed under arrest for accepting 100 million won (USD 73,421) in gift certificates while working for President Roh. Other progressive politicians under investigation include: --Lee Kwang-jae, DP lawmaker with close ties to Roh Moo-hyun, detained for receiving illegal political funds worth over 200 million won (USD 146,842); --Suh Gap-won, DP representative and Senior Vice-Floor Leader, alleged to have received tens of thousands of dollars in illicit funds; --Choi Cheol-kook, DP lawmaker, alleged to have received illicit funds; --Kim Hyuck-kyu, former South Gyeongsang governor; --Lee Jeong-wook, former Korea Maritime Institute head, detained for receiving illicit funds. -------------- Conservatives Far From Immune -------------- ¶4. (C) What originally seemed like a probe targeting only the progressives, soon included allegations directed at a number of high-profile GNP politicians. Most notably was the prosecutors' summons on March 26 of Park Jin, GNP Representative and Chair of the Foreign Affairs, Trade and Unification (FATU) Committee. Park Jin's Chief of Staff (COS) confirmed on March 27 that the prosecutor's office had summoned Park Jin for questioning with regard to the unfolding bribery scandal. Park's COS told poloff that the allegations against Park Jin were unfounded, and the COS was confident that Park Jin had nothing to worry about. The FATU Committee's COS said he spoke to Park Jin March 27 and described him as angry at being summoned for questioning but resolute in denying involvement in the scandal. Representative Park apparently plans to file defamation charges. The FATU COS was, nevertheless, concerned by the potential for the scandal to ensnare the committee's chairman. ¶5. (SBU) Also on March 26, prosecutors announced that they were investigating former GNP lawmaker and current Ambassador to Japan Kwon Chul-hyeon. Kwon served three terms representing Busan, and is known to be a strong supporter of President Lee. Cho Boo-kil, a former public relations secretary for both President Lee and his older brother, Representative Lee Sang-deuk, was arrested on charges of taking money from Park and for trying to halt the tax probe into Park's company. Other conservative politicians under investigation include: --Huh Tae-yeol, GNP Representative, alleged to have received illicit funds; --Kwon Kyung-seok, GNP Representative, alleged to have received illicit funds; --Song Eun-bok, former Gimhae Mayor, detained for receiving illicit funds. -------------- Busan Connection -------------- ¶6. (C) The scandal primarily involves politicians grounded in South Gyeongsang Province and Busan, but an unconfirmed news report claims the investigation is targeting as many as 70 people, including several former and incumbent prosecutors. An aide to GNP Representative Chung Doo-hwan told poloffs that everyone in Busan, regardless of party affiliation, is involved in this scandal. In fact, the contact noted, Park was more tied to the conservatives, but supported Roh and the DP when it was in power until last year. Overseas locations are also involved, and prosecutors allege that many politicians -- including Park Jin and Lee Kwang-jae -- accepted money through a New York restaurateur. Some politicians are alleged to have also received funds in Vietnam. -------------- Political Motivation Unlikely -------------- ¶7. (C) Speculation is swirling about possible political motivations for the investigation. The DP has claimed that the probe is part of a Blue House effort to eradicate pro-Roh elements of the opposition. These allegations have failed to gain momentum, however, as prosecutors began to implicate conservative politicians. Some within the GNP think the Blue House is trying to undermine supporters of the President's conservative rival Park Geun-hye and claim that both Lee Sang-deuk and Kim Young-ho also received money but are not being investigated because of their close ties to the administration. With the number and range of politicians involved, however, it is doubtful that any one party or faction will emerge from this scandal unscathed. -------------- Comment -------------- ¶8. (C) Korean politics is no stranger to corruption, but the Park Yeon-cha scandal is the largest and most wide-ranging in quite some time. One politician -- Lee Kwang-jae -- has already fallen victim and more are sure to follow. While it is likely the probe started with former President Roh's aides, it is also likely that nobody, not even the Blue House, could control the investigation once it was underway. Now that it is the top news story, prosecutors are forced to follow through and the Blue House cannot appear to be intervening. Undoubtedly, the scandal will dominate the next National Assembly session set to start on April 2. In fact, between the scandal and the upcoming by-elections -- not to mention ongoing discussions about media reform and KORUS FTA -- it is difficult to see how politicians will find the time to focus on legislation. STEPHENS