[Asia Economy Reporter Kim Hyung-min] The prosecution is expected to indict Lee Jae-myung, leader of the Democratic Party of Korea, as early as this week in connection with the 'Seongnam FC sponsorship fund' allegations. It is widely believed in legal circles that requesting an arrest warrant will be practically difficult. If the prosecution requests an arrest warrant, the National Assembly will put the consent for arrest to a vote in the plenary session. The likelihood of the consent for arrest passing for the current leader of the main opposition party is slim. The main opposition party holds the most seats, making it difficult to expect passage.
The full legal judgment on the 'Seongnam FC sponsorship fund' allegations is imminent, but Lee and the Democratic Party argue that "the sponsorship was normal compared to other local government teams." When Lee was summoned and investigated by the Suwon District Prosecutors' Office Seongnam Branch on the 10th, he submitted a statement to this effect. He particularly emphasized that it was the same as the sponsorship fund attraction by Hong Joon-pyo, mayor of Daegu, when he was governor of Gyeongnam Province and owner of Gyeongnam FC. If Lee is to be punished for third-party bribery, then Mayor Hong should also be punished.
Is that really the case? Our outlet conducted a fact check through a K League club sponsorship research report obtained exclusively. The data was commissioned by the management consulting firm 'Startium' from the Cheonan Football Comprehensive Center Establishment Promotion Group. The official title is 'Report on the Estimation of Price Scale for Professional Football Club Naming Rights and Feasibility Review of Contributions.' It contains an investigation of sponsorship fund attraction status for all professional football clubs in the first and second divisions of the domestic league as of May to August 2021.
Is the amount of Seongnam FC sponsorship fund unreasonable?
First, it is necessary to verify whether the scale of Seongnam FC's sponsorship fund was unusually large. There are suspicions that the amount was unreasonable. This was the starting point for the overall 'Seongnam FC sponsorship fund' allegations against Lee. According to prosecution investigations, Seongnam FC received about 17 billion KRW in total sponsorship from Doosan Construction (4.2 billion KRW), Naver (3.9 billion KRW), and Nonghyup (3.6 billion KRW) from 2015 to 2017.
According to the report, K League clubs usually classify sponsoring companies into three to four tiers such as main and premium sponsors. Among the top-tier sponsors, there are not many cases of sponsorship funds at the 4 to 5 billion KRW level, but there have been one or two instances. From that perspective, Doosan Construction's 4.2 billion KRW and Naver's 3.9 billion KRW are not unusual.
It is questionable whether they did not engage in uniform sponsorship despite paying such large amounts. The report states, "Top-tier sponsors secure and utilize their rights mainly through uniform branding." By placing the company name on the front of the uniform, they widely announce "We are this company's top sponsor" and thereby guarantee their rights as sponsors. However, Seongnam FC did not have the names of Doosan Construction, Naver, or others anywhere on their uniforms. Also, the larger the amount, the more burden the company may have, so most contracts are made by adding in-kind contributions rather than giving 100% cash sponsorship. In Seongnam FC's case, it appears unusual that all sponsorship was in cash without accompanying other services or goods.
Therefore, while the sponsorship funds Seongnam FC received at the time seem plausible, there is room for suspicion. The report is based on 2021 data, but the allegations arose six years earlier. Professional sports clubs usually accumulate history and increase in value over time. The amounts involved in various contracts should be considered to have increased over time, or at least not decreased. Considering this, the 3 to 4 billion KRW level sponsorship funds for Seongnam FC from 2015 to 2017 are not typical.
An official familiar with K League club sponsorship fund attraction said, "It is like reaching for the stars for a club marketing staff to bring in 3 to 4 billion KRW sponsorship from a company," adding, "It should be seen as sponsorship possible because of a special relationship between Seongnam City and the companies."
Results Report on the Estimation of Price Scale for Professional Football Club Naming Rights and Feasibility Study of Participation - 'K League Sponsorship Cases'
Report on the Estimation of Price Scale for Professional Football Club Naming Rights and Feasibility Study of Participation Section on K League Sponsorship
Was Seongnam FC a team worthy of sponsorship?
Then, was Seongnam FC at the time a team worthy of receiving tens of billions in sponsorship? If it was, the companies' sponsorships could be justified.
The concentration of corporate sponsorship was from 2015 to 2017. Seongnam FC won the FA Cup in 2014, earning the right to participate in the 2015 Asian Football Confederation (AFC) Champions League. Teams participating in the ACL enjoy tremendous economic effects. Hyundai Motor Company, the main sponsor of Jeonbuk Hyundai Motors, recorded 94.7 billion KRW in media exposure effects when Jeonbuk won the ACL in 2016. Even in 2015, when they reached the quarterfinals, the effect was 31.5 billion KRW. This was likely attractive news for companies wanting to sponsor Seongnam FC. That year, Seongnam FC was eliminated in the ACL round of 16.
The sponsorship effect was really short-lived. After that, the team declined. Seongnam FC finished 11th in the 2016 regular league and was relegated to the second division the following year. Nevertheless, companies strangely continued sponsorship with Seongnam FC until 2017 without cutting ties. Usually, when a team is relegated to the second division, companies leave immediately. At the time, Lee, then mayor of Seongnam City, proposed and implemented a promotional event called the 'Flag Derby,' where the losing team's flag is displayed at the winning team's home stadium for a certain period after a match against Suwon FC, showing a unique approach. However, it is hard to see that alone as enough to retain corporate interest. Seongnam FC did not have any outstanding star players at the time. Although national team striker Hwang Ui-jo was with the team from 2014 to 2017, the football community's assessment is that he did not have the fame to justify tens of billions in investment.
2014 Seongnam FC FA Cup Victory Photo by Kim Hyun-min
The prosecution's investigation focuses on 'quid pro quo'
Legal insiders suspect the intention behind Seongnam FC sponsorship funds mainly due to "quid pro quo." The prosecution is also focusing its investigation on this aspect. Regardless of the amount or scale of the sponsorship funds, it appears to involve improper solicitation or quid pro quo. Compared to sponsorship funds of other clubs, this is judged to be different in terms of quid pro quo.
The Suwon District Prosecutors' Office Seongnam Branch has concentrated on clarifying this quid pro quo. For example, in the case of Doosan Construction, it is believed that after paying sponsorship funds, Doosan Group received conveniences such as land-use changes for a hospital site in Jeongja-dong, Bundang-gu, Seongnam City, which it owned. The prosecution also believes that Naver, Cha Hospital, and others paid sponsorship funds in exchange for Seongnam City resolving major issues for each company.
Regarding the 'Seongnam FC Sponsorship Fund Suspicion' case, Lee Jae-myung, the leader of the Democratic Party of Korea, is returning home after being questioned at the Suwon District Prosecutors' Office Seongnam Branch in Seongnam-si, Gyeonggi-do on the afternoon of the 10th. [Joint Coverage] [Image Source=Yonhap News]
While Lee and the companies involved deny all these relationships, the prosecution appears confident in proving the charges. It is reported that the prosecution has virtually completed the composition of third-party bribery charges against Lee. They have secured numerous related Supreme Court precedents and reviewed them over a long period. If an arrest warrant is requested, Minister of Justice Han Dong-hoon will explain the consent for arrest in the National Assembly; if not requested, the prosecution is expected to disclose all investigation details through the indictment. Lee's fate will depend on how well the prosecution can prove the quid pro quo of the sponsorship funds.
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