[Law & Story] Investigative Power Adjustment Put to the Test by 'Daejang-dong' and 'Report Solicitation' Probes

From the left, Lee Jae-myung, Governor of Gyeonggi Province, and Yoon Seok-youl, former Prosecutor General.
[Image source=Yonhap News]

In Choi Seok-jin's Legal Story, we aim to cover various issues revolving around the legal community, focusing on courts and prosecutors. We plan to write somewhat freely on topics such as the legal points or prospects of major cases, behind-the-scenes stories, and untold anecdotes without being bound by specific themes or formats. Today marks the eleventh story, discussing the investigations by the High-ranking Officials' Crime Investigation Office (Gong-su-cheo), prosecution, and police into the 'Daejang-dong' and 'Report Solicitation' allegations.

[Asia Economy, Choi Seok-jin, Legal Affairs Specialist] The 'Report Solicitation' allegation involving former Prosecutor General Yoon Seok-yeol and the 'Daejang-dong Development Project Favoritism' allegation involving Gyeonggi Province Governor Lee Jae-myung have drawn the attention of not only the political and legal communities but the entire nation.

Both the 'Report Solicitation' allegation, where the prosecution is accused of soliciting reports against ruling party politicians to the opposition party, and the 'Daejang-dong' allegation, where a private contractor earned astronomical profits in a public-private joint development project allegedly backed by government favoritism, are shocking in themselves. However, what makes them particularly significant is that the top presidential candidates from both ruling and opposition parties are under investigation just five months before the presidential election.

Meanwhile, this investigation is expected to serve as an opportunity to evaluate the effectiveness of the High-ranking Officials' Crime Investigation Office (Gong-su-cheo), established as part of the Moon Jae-in administration's prosecution reform, and the adjustment of investigative authority between prosecution and police.

First, regarding the 'Report Solicitation' allegation, complaints were filed with both Gong-su-cheo and the prosecution, but the prosecution transferred the case to Gong-su-cheo, which took charge of the investigation. Since Gong-su-cheo holds investigative and prosecutorial authority over crimes committed by the Prosecutor General or prosecutors during their tenure, this outcome was somewhat anticipated.

On the other hand, the 'Daejang-dong' allegation is under active investigation by the prosecution. After receiving intelligence from the Financial Intelligence Unit (FIU) in early April about suspicious fund flows related to Hwacheon Daeyu, the police, criticized for delaying the investigation for five months, have belatedly switched to an investigative stance, resulting in both prosecution and police conducting separate investigations.

Previously, in the 'LH speculation' allegation case, the police led the investigation instead of the prosecution, which lacked direct investigative authority under the revised Prosecutors' Office Act. However, as the police failed to achieve significant investigative results and public criticism grew, voices within the ruling party called for the prosecution, initially supporting the police investigation, to take direct action.

Eventually, the prosecution expanded the 'Real Estate Speculation Crime Task Force' across 43 prosecution offices nationwide to combat real estate speculation crimes and assist in recovering criminal proceeds. Nevertheless, the government joint special investigation headquarters (Special Investigation Headquarters), centered on the National Police Agency, announced a modest interim result: investigating over 2,800 suspects but arresting only 34 (14 of whom were arrested by the prosecution).

'Daejang-dong' Investigation... Police Reluctant to Yield vs. Prosecution Holding Prosecutorial Authority

Frankly, the 'Daejang-dong' allegation is a sensitive case for both the prosecution and police to investigate.

This is because Lee Jae-myung, who is highly likely to be selected as the ruling party's final presidential candidate on the 10th, is involved. Investigating a ruling party presidential candidate who has already been selected and is actively campaigning is a significant burden.

Regardless of whether the investigation reveals Lee's involvement, the mere fact that the investigation is ongoing could be a disadvantageous variable for him. Moreover, if Lee is elected president, he will have the authority to appoint the Prosecutor General and the National Police Agency Commissioner, and having a record of investigating him could effectively end any prospects for promotion.

However, it is also difficult to conduct a passive investigation.

The police, at the very least, need to demonstrate a full-fledged investigation to escape criticism for delaying the case for five months. Having been granted broad and independent investigative authority through the adjustment of investigative powers between prosecution and police, the police need to show improvement in their investigative capabilities, which were questioned during the 'LH speculation' case.

The prosecution also needs to assert its presence despite its significantly reduced investigative authority due to the adjustment of investigative powers.

Above all, since there is an 'internal whistleblower' in this case, it is expected to be difficult to conclude the investigation at an appropriate level.

In fact, the media coverage has been ahead of the investigation in the early stages. Whether due to dissatisfaction with profit distribution or other reasons, an insider who knows the substance of the allegations is simultaneously providing tips to investigative agencies and the media, forcing the prosecution and police to examine the entire range of allegations.

In the 'Daejang-dong' allegation, embezzlement and breach of trust charges against Hwacheon Daeyu affiliates, bribery charges involving former Seongnam Urban Development Corporation Planning Director Yoo Dong-gyu and political figures, and breach of trust charges against Seongnam Urban Development Corporation and Seongnam city officials may be at issue.

The revised Prosecutors' Office Act, amended to adjust investigative authority between prosecution and police, divides investigative authority based on the type of crime and, in some cases, the amount of proceeds involved. However, the prosecution retains investigative authority over crimes discovered during investigations of directly targeted crimes or related crimes forwarded by the police. The police have no restrictions on the types of crimes they can investigate.

Therefore, even under the revised Prosecutors' Office Act, both the police and prosecution have investigative authority over this case, making simultaneous investigations by both agencies inevitable for some time.

Recently, the police secured and are analyzing former Director Yoo's mobile phone, which the prosecution missed during a search and seizure. This can be seen as a benefit of simultaneous investigations by prosecution and police. The prosecution, which initially dismissed media reports that Yoo threw his phone out the window as false, later apologized.

However, concerns about duplicate investigations are unavoidable. The police seem aware of this and have stated they will investigate within a scope that does not overlap with the prosecution. The prosecution also emphasizes cooperative investigation with the police. Still, since both agencies are investigating the same matter without clear boundaries, competitive investigations are likely. It appears that concrete discussions for cooperative investigation between the prosecution and police have yet to begin.

For example, Kim Man-bae, the major shareholder of Hwacheon Daeyu and a key figure in the allegations, appeared at the Yongsan Police Station in Seoul on the 27th of last month for a witness interview and is scheduled to appear at the Seoul Central District Prosecutors' Office on the 11th as a suspect. How the prosecution and police will share investigation details of key suspects, evidence obtained through search and seizure, and forensic analysis of mobile phones remains to be seen. This is the first time since the adjustment of investigative authority that prosecution and police are simultaneously investigating the same case.

However, even though the police have investigative authority, the prosecution must intervene to request arrest warrants for major suspects. Ultimately, since the prosecution holds prosecutorial authority, it is expected that the prosecution will take the lead as the investigation progresses.

Wide Scope of 'Daejang-dong' Investigation... Attention on Whether Governor Lee Jae-myung Will Be Implicated

As former Democratic Party lawmaker Geum Tae-seop recently stated on a TV current affairs program, this case is truly enticing for prosecutors.

There are suspicious fund flows amounting to billions of won, and numerous influential figures, including former Supreme Court justices, Prosecutor Generals, special prosecutors, chief prosecutors, and current lawmakers, are involved. Additionally, an internal whistleblower has provided solid investigative leads.

The prosecution and police investigations are expected to focus on analyzing the fund flows of Kim, the major shareholder of Hwacheon Daeyu, and the owners of Cheonhwa-dongin, a subsidiary of Hwacheon Daeyu that received development profits.

To clarify lobbying allegations involving Seongnam Urban Development Corporation, Seongnam city officials, and political figures, it is essential first to uncover the routes through which the funds were provided.

Separately, it must be determined whether individuals belonging to the so-called '50 Billion Club' actually received money or were promised money. If economic benefits were delivered or promised, it must be clarified whether such financial rewards were compensation for specific roles, fees for services, or insurance for the future.

In particular, former Supreme Court Justice Kwon Soon-il, who has already been revealed to have received a monthly advisory fee of 15 million won after retirement, must address public suspicion regarding whether there is a correlation between his strong not-guilty opinion in Lee's Public Official Election Act violation case?where he argued against existing Supreme Court precedents and his past rulings?and the excessive advisory fees paid.

Investigations into Seongnam Urban Development Corporation and Seongnam city officials who granted Hwacheon Daeyu preferential treatment enabling astronomical profits are also a crucial part of the investigation.

It has already been revealed that when former Director Yoo served as Planning Director or acting president of Seongnam Urban Development Corporation, he made incomprehensible decisions during the selection of the Daejang-dong developer and the design of the profit distribution structure, allowing Hwacheon Daeyu to earn massive excess profits and causing losses to Seongnam city.

The key issue is whether these decisions were made solely by former Director Yoo or whether they were made after prior consultation or reporting to Lee, who was then the mayor of Seongnam.

Lee claims he appointed Yoo as Planning Director because he trusted his abilities. If Yoo, driven by personal greed, selected developers and designed profit distribution structures contrary to Seongnam city's interests and promised large sums from Hwacheon Daeyu, Lee would bear no legal responsibility. As Lee himself stated, he would bear moral and political responsibility for failing to properly manage his subordinates.

Conversely, if evidence emerges that Lee influenced decision-making at Seongnam Urban Development Corporation or tacitly approved after receiving detailed reports from Yoo, Lee's legal responsibility could be questioned.

Since the allegations surfaced, Lee has thoroughly distanced himself from Yoo, repeatedly stating that Yoo was merely an employee of a Seongnam city-affiliated institution and not a close aide. However, Yoo, who majored in vocal music at university and had little practical real estate experience, declared support for Lee during his candidacy for Seongnam mayor while serving as chairman of the remodeling promotion committee for Maehwa Village 2nd Complex in Bundang-gu, Seongnam, in 2010. After Lee's election, Yoo served as secretary of the mayoral transition committee, Planning Director, and acting president of Seongnam Urban Development Corporation. Later, after Lee was elected governor of Gyeonggi Province, Yoo was appointed president of Seongnam Tourism Corporation, a vice-ministerial position. Given this, it is difficult to view their relationship as entirely unrelated, as Lee recently analogized to the relationship between a president and a Korea Electric Power Corporation employee.

However, whether Yoo and Lee's relationship is close enough to be considered aides or merely a superior-subordinate relationship is not the critical point. For Lee's legal responsibility to be questioned in the 'Daejang-dong' allegation, it must be revealed that he was involved in developer selection, profit distribution design, or development project permits, or that funds from Hwacheon Daeyu flowed into Lee's election campaign or close aides.

Even if investigations reveal that former Justice Kwon led a not-guilty verdict for Lee after receiving lobbying from Hwacheon Daeyu, it is unlikely that Lee will bear legal responsibility. Hwacheon Daeyu, which received various preferential treatments, clearly had reasons to avoid Lee losing his governorship. Under current criminal procedure law, even if a judge involved in a trial is convicted of official misconduct, a not-guilty verdict for the defendant is not subject to retrial, so Lee's not-guilty verdict remains effective.

The crucial factor will be the investigative will of the prosecution and police. Unless concrete evidence or testimonies emerge during the investigation or media reports reveal Lee's direct involvement, it is expected to be difficult for the prosecution or police to target Lee directly. The fact that Seongnam city has not yet been searched supports this view.

Finally, attention is on how much of the massive profits earned by private contractors through the Daejang-dong development project can be considered criminal proceeds and recovered. If breach of trust by former Director Yoo and others is recognized, Seongnam city, which lost out on excess profits to private contractors, may claim damages against Yoo or Hwacheon Daeyu based on the expected profit distribution ratio in typical public-private joint development projects. Residents of Daejang-dong, who had their land expropriated at low prices, are also expected to file lawsuits seeking the return of the shortfall from fair compensation through unjust enrichment claims.

The Core of the 'Report Solicitation' Allegation Is Abuse of Power... Difficult to Prove Charges Against Former Prosecutor General Yoon Seok-yeol

Compared to the 'Daejang-dong' allegation, the 'Report Solicitation' allegation is relatively straightforward.

The number of people involved is much smaller, and the number of criminal charges is also limited.

The core of the 'Report Solicitation' allegation, as stated by Kim Jin-wook, head of Gong-su-cheo, is abuse of power.

The allegation is that former Prosecutor General Yoon Seok-yeol directly instructed or ordered his subordinate, former Deputy Director Son Joon-sung of the Supreme Prosecutors' Office Investigation Information Policy Division, or his superior, to solicit reports against ruling party politicians such as Choi Kang-wook and Hwang Hee-seok.

Article 123 of the Criminal Act defines abuse of power as a crime committed when a public official abuses their authority to compel someone to perform an unnecessary act or obstruct someone's exercise of rights.

Therefore, if former Deputy Director Son, identified as having delivered the complaint via Telegram to Assemblyman Kim Woong, personally drafted and delivered the complaint, it would be difficult to establish abuse of power. However, if Son instructed another subordinate prosecutor to draft the complaint, abuse of power could be established. Whether the prosecutor who drafted the complaint actually exists is crucial.

Furthermore, Assemblyman Kim Woong of the People Power Party, accused of delivering the complaint to whistleblower Cho Seong-eun, was no longer a prosecutor but preparing to run for office at the time, making it difficult to recognize him as a public official subject to abuse of power charges. Legal experts analyze that unless it is proven that former Prosecutor General Yoon or Son conspired closely with Kim and shared roles, making Kim a co-perpetrator, it is difficult to establish abuse of power charges against Kim.

For former Prosecutor General Yoon, it is unlikely he personally drafted the complaint. If he instructed a subordinate prosecutor to draft or deliver the complaint to the opposition party, abuse of power could be established. However, proving this is challenging. Based on the currently revealed process of complaint delivery from Son to Kim and Cho, it is difficult to hold Yoon legally responsible.

Assuming Son's claim that the Telegram conversation between him and Kim was fabricated is false and that Son did send the complaint, to hold Yoon criminally liable, there must be physical evidence or concrete testimony supporting that Yoon instructed Son to draft or deliver the complaint.

Even if Yoon did give such instructions, it is likely they were verbal, and related reports or evidence are unlikely to exist. Given the difficulty in forensically analyzing Son's mobile phone, it is indeed challenging for Gong-su-cheo to prove Yoon's abuse of power charges.

If it is confirmed that Son drafted or delivered the complaint, he could face charges for violating the Public Official Election Act, which prohibits public officials from interfering in elections. If a prosecutor who accessed the real-name judgment document delivered to Cho is identified, charges for violating the Personal Information Protection Act could apply.

The ruling party may have hoped the prosecution, rather than Gong-su-cheo, would handle this case. Gong-su-cheo was established to prevent prosecutors from shielding their own in cases of prosecutorial misconduct, but the prosecution, led by pro-government figures like Prosecutor General Kim Oh-soo and Seoul Central District Prosecutors' Office Chief Lee Jung-soo, might conduct a more rigorous investigation into former Prosecutor General Yoon.

It is unclear whether Gong-su-cheo requested the prosecution to transfer the case or the prosecution independently transferred it to Gong-su-cheo. Regardless, the prosecution has been relieved of the burden of investigating its own organization's political neutrality and internal scandals.

Meanwhile, Gong-su-cheo is also investigating the 'Tip Solicitation' allegation filed by Yoon's side.

Gong-su-cheo has registered National Intelligence Service Director Park Ji-won as a suspect and launched an investigation. However, due to security and other restrictions, it is practically difficult to uncover any conspiracy between Director Park and whistleblower Cho.

If it is confirmed that Director Park conspired with Cho to provide whistleblowing that could jeopardize opposition presidential candidate Yoon, it would be devastating not only for Director Park personally but also for President Moon Jae-in and would likely become a critical setback for the ruling party in the upcoming presidential election. Therefore, Gong-su-cheo is unlikely to proceed with a hasty investigation.

The Issue Is Time... Comparing Investigative Capabilities of Gong-su-cheo, Prosecution, and Police

Although both the 'Daejang-dong' and 'Report Solicitation' allegations involve leading presidential candidates from ruling and opposition parties, the likelihood of Lee or former Prosecutor General Yoon being indicted and tried appears very low at present.

The question is when Gong-su-cheo, prosecution, and police will announce investigation results stating 'no criminal charges' or 'insufficient evidence to prove charges.' This is also an opportunity to compare the capabilities of these investigative agencies in swiftly handling politically sensitive cases and delivering results that satisfy the public.

There are only five months left until the presidential election on March 9 next year.

Lee is expected to be selected as the ruling party's presidential candidate on that day, and Yoon, having passed the second cut-off, maintains the top position among candidates within his party.

As things stand, it is highly likely that Lee and Yoon will face off as presidential candidates from the ruling and opposition parties, respectively.

The investigations into these allegations will likely continue to influence their approval ratings throughout the remaining People Power Party primary process and the full-scale presidential race.

Therefore, there is no choice but to closely watch how the investigations unfold and when the results will be announced.

Gong-su-cheo's investigation into the 'Report Solicitation' allegation, which started earlier, may conclude as soon as this month. However, the belatedly surfaced 'Daejang-dong' allegation involves such a wide scope that it is expected to remain a major issue throughout the presidential election season.