Prosecutors Intensify Pressure on KH Group... Bae Sang-yoon's Return Remains Uncertain

Prosecutors are recently expanding the scope of investigations targeting KH Group, drawing legal circles' attention to the timing of Chairman Bae Sang-yoon's return from overseas.

KH Group Photo by Yonhap News

According to the legal community on the 28th, KH Group is currently under simultaneous investigation by three prosecution offices. First, the Violent Crime Investigation Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Shin Jun-ho) is looking into allegations of bid-rigging related to the Alpensia resort. The suspicion involves KH Gangwon Development, a special purpose corporation under KH Group that became the final successful bidder along with Gangwon Development Corporation (GDC) during the sale of Alpensia Resort in July 2021, allegedly colluding in advance on the bid. The Suwon District Prosecutors' Office is conducting additional investigations into KH Group's involvement in the Ssangbangwool Group's 'North Korea remittance' allegations. Key figures in this case, including former Ssangbangwool Group Chairman Kim Sung-tae and former Gyeonggi Province Peace Deputy Governor Lee Hwa-young, are under prosecution and trial, with only the investigation of Chairman Bae remaining. Prosecutors believe that Ssangbangwool Group conspired with Gyeonggi Province to transfer funds to North Korea in exchange for favors, and KH Group also cooperated in the related activities. On the 21st, the Southern District Prosecutors' Office began a forced investigation by raiding KH Philux. KH Philux is suspected of manipulating stock prices using information related to the development and approval of COVID-19 treatments from 2020 to 2022 through bio companies in which it holds shares. This case also inevitably requires an investigation of Chairman Bae.

However, the timing of Chairman Bae's return remains uncertain. According to business circles, he is currently staying in Southeast Asia. Chairman Bae's position is to return after resolving KH Group's pending issues, such as the sale of the Namsan Grand Hyatt Hotel, but it is unclear when these matters will be concluded. The sale of the Grand Hyatt Hotel is expected to be completed around the end of the year. Blue Cove Asset Management, the buyer, is reportedly preparing the payment. They plan to raise and pay 160 billion KRW as a mid-term payment by May and pay the remaining 220 billion KRW by the end of the year. Chairman Bae may postpone his return until next year citing this reason.

At present, investigative authorities cannot take any special measures and must wait until Chairman Bae voluntarily returns. Although the Gangwon Police, investigating the Alpensia bid-rigging allegations, issued an arrest warrant for Chairman Bae and placed him on the wanted list to notify upon his return, they could not invalidate his passport. This is because the offense of bid interference carries a maximum prison sentence of less than two years, which does not meet the passport law's criteria for 'persons subject to investigation suspension or arrest warrant issuance for crimes punishable by imprisonment of three years or more.' However, given the prosecutors' comprehensive pressure through investigations, there is speculation that Chairman Bae may voluntarily return to protect the group.

Once Chairman Bae returns, the police will first arrest and investigate him before handing him over to the prosecutors. Subsequently, the Seoul Central District Prosecutors' Office will conduct the initial investigation of Chairman Bae, followed by necessary investigations by the Suwon District Prosecutors' Office and the Southern District Prosecutors' Office in that order.