Prosecutors Launch Full-scale Reinvestigation of Gwak Sang-do's '5 Billion Club'... Hoban Construction and Others Raided (Comprehensive)

by Kim HyeongMin

Published 11 Apr.2023 11:45(KST)

On the 11th, the prosecution launched a full-scale reinvestigation into former lawmaker Gwak Sang-do and his son’s alleged acceptance of 5 billion won in bribes and concealment of criminal proceeds. The son, Byung-chae, who received 5 billion won as severance pay, was also booked, with a focus on the connection to former lawmaker Gwak’s bribery.

Former People Power Party lawmaker Kwak Sang-do, who is accused of receiving bribes from the Daejang-dong group under the pretext of his son's severance pay, is attending the first trial sentencing hearing related to violations of the Act on the Aggravated Punishment of Specific Crimes at the Seoul Central District Court in Seocho-gu, Seoul on the 8th. Photo by Kang Jin-hyung aymsdream@

The Anti-Corruption Investigation Division 3 of the Seoul Central District Prosecutors’ Office (Chief Prosecutor Kang Baek-shin) sent prosecutors and investigators to about 10 locations, including Hoban Construction, Bukuk Securities, and related offices, to secure materials related to the Korea Development Bank consortium that participated in the Daejang-dong development project bidding.

The prosecution is known to have conducted the search and seizure after identifying additional circumstances where the Korea Development Bank consortium pressured Hana Bank to leave the competing 'Seongnam’s Garden' consortium. This is the first search and seizure related to the Korea Development Bank consortium.

During the 2015 bidding for the Daejang-dong development project, three consortia applied: Seongnam’s Garden consortium, which included Hwacheon Daeyu Asset Management; the Korea Development Bank consortium; and the Meritz Securities consortium. Hoban Construction, which partnered with the Korea Development Bank during the consortium formation, reportedly proposed to Hana Bank, which had planned to join Seongnam’s Garden, to work together with them.

The prosecution reportedly secured testimony from private developer lawyer Nam Wook and others that Hoban Chairman Kim Sang-yeol visited Kim Jung-tae, chairman of Hana Financial Group, and pressured him with the implication that if the proposal was not accepted, Hoban’s funds deposited in Hana Bank would be withdrawn.

In this process, the first investigative team concluded that former lawmaker Gwak, at the request of Kim Man-bae, the major shareholder of Hwacheon Daeyu, exerted influence on Hana Bank to prevent the consortium’s collapse and received 5 billion won (2.5 billion won after tax) in bribes through his son Byung-chae under the name of severance pay.

However, the first trial court that handled former lawmaker Gwak’s case acknowledged that the 5 billion won severance pay received by Byung-chae was "exceptionally excessive by social standards" but did not recognize the bribery charge, stating it was difficult to view the two as an 'economic community.'

The prosecution, appealing the first trial, applied the Specific Crimes Aggravated Punishment Act’s bribery charges to Byung-chae when requesting the search warrant from the court. They regarded former lawmaker Gwak and Byung-chae as an economic community and co-conspirators in accepting the 5 billion won bribe. Byung-chae had already been reported as a co-conspirator in the early stages of the Daejang-dong suspicion and had undergone suspect investigation but was not indicted during the first investigation.

The prosecution also applied charges of violating the Act on the Regulation of Concealment of Criminal Proceeds to the 5 billion won received by Byung-chae, arguing that it was disguised as severance pay while actually being a bribe.

Regarding the prosecution’s search and seizure on the day, former lawmaker Gwak said, "This is the first time I have heard that my son and I have been booked for violating the Act on the Regulation of Concealment of Criminal Proceeds," adding, "I have no knowledge of the details of the charges. There was no search and seizure of me or my son."

He continued, "Recently, there was a report that during Kim Man-bae’s bail hearing, the prosecution claimed that Kim had coached Gwak Byung-chae through former Hwacheon Daeyu CEO Lee Sung-moon to practice testimony, but this is also news to me and I believe it is not true."