One Year of Prosecutors' Solar Power Investigation by National Fiscal Crime Joint Unit... Will Saemangeum and Anmyeondo Corruption Be Punished?

Seoul Northern District Prosecutors' Office Launched on September 30 Last Year
Solar Power Project Corruption Allegation 'First Case'
"Key Issues: Routine Administrative Judgment and Proof of Quid Pro Quo"

The Seoul Northern District Prosecutors' Office Joint Investigation Unit for National Financial Crimes (Joint Investigation Unit), responsible for investigating solar power corruption, marked its first anniversary on the 30th. The Joint Investigation Unit is currently investigating corruption allegations related to the 'Saemangeum Solar Power' and 'Anmyeondo Solar Power' projects. In July, the prosecution conducted raids on Gunsan City Hall and Taean County Office, and has been intensifying the investigation by summoning and questioning related personnel until recently. On February 2nd, five construction company representatives were arrested and indicted on charges of fraud for submitting false tax invoices inflating construction payments to financial institutions from 2019 to last year, securing loans amounting to 55.7 billion KRW under the pretext of solar power plant construction costs.

The Seoul Northern District Prosecutors' Office National Financial Crime Joint Investigation Unit conducted a search and seizure of the Ministry of Trade, Industry and Energy and Taean County Office on July 28 regarding allegations of corruption related to the solar power plant in Anmyeondo.
[Image source=Yonhap News]

The Joint Investigation Unit was launched to address the growing scale of national financial crimes and to compensate for the previously insufficient cooperation system among related government agencies. It comprises 30 experts from the prosecution, National Tax Service, Customs Service, Financial Supervisory Service, and Korea Deposit Insurance Corporation. Through collaboration among experts from related agencies, the unit conducts 'fast-track' investigations into tax and financial crimes as well as money laundering offenses. Experts dispatched from the National Tax Service, Customs Service, Financial Supervisory Service, and Korea Deposit Insurance Corporation detect and analyze criminal suspicions, support fund tracing, tax data notifications, and recovery of illicitly accumulated assets, while the prosecution handles data analysis, coercive investigations, prosecution, and maintenance of public prosecution.

In the prosecution personnel reshuffle on the 20th, Chief Prosecutor Min Kyung-ho (52, Judicial Research and Training Institute class 33) was appointed as the new head of the Joint Investigation Unit. Chief Min is a financial crime expert who previously served as head of the Tax Crime Investigation Department at the Seoul Central District Prosecutors' Office. On the 14th, he also indicted Chairman Lee Sang-young and former CEO Han Jae-jun on allegations of accounting fraud at Daewoo Industrial Development, and Chairman Kim Young-jun of Ewha Group on charges of creating slush funds worth hundreds of billions of won and tax evasion.

◆ Favoritism toward Mayor’s High School Alumni? Saemangeum Allegations = The Board of Audit and Inspection reported in June that Mayor Kang Im-jun of Gunsan City was suspected of abuse of power and referred the case to the prosecution. Through an audit on the 'Renewable Energy Project Implementation Status,' the Board detected suspicious facts related to Gunsan City's onshore solar power project with a total project cost of about 130 billion KRW. The prosecution is investigating allegations that during the selection process of the preferred negotiation partner, Gunsan City gave preferential treatment to a construction company whose CEO is a high school alumnus of Mayor Kang.

Mayor Kang is suspected of forcing the contract by re-signing a funding agreement with another financial institution after the original financial institution, responsible for funding including joint guarantees, refused the contract due to unmet conditions. According to the Board of Audit and Inspection, the newly contracted financial institution offered an interest rate at least 1.8 percentage points higher annually. The expected loss to Gunsan City due to this is estimated at about 11 billion KRW over the next 15 years. Gunsan City is also suspected of splitting the solar power facility scale from 99 MW into two 49 MW units to enable the selection of this company.

Gunsan City denied the allegations, stating, "We cannot agree with the claim that preferential treatment was given solely because the construction company CEO and the local government head are alumni." Regarding the claim of about 11 billion KRW in interest losses, the city explained, "The construction costs incurred during the construction period were planned to be loaned for only one year and repaid through a citizen fund once it was established."

The Joint Investigation Unit raided Gunsan City Hall and other locations on July 26. They secured original documents and computers from Mayor Kang’s office and the Saemangeum Energy Department at Gunsan City Hall. The prosecution is reportedly analyzing the seized materials and summoning additional related personnel for questioning.

Saemangeum Onshore Solar Power Facility Site
[Image source=Yonhap News]

◆ 'Collusion between Officials and Project Implementers' Anmyeondo Allegations = The solar power project in Taean County, Chungnam Province, is a 500 billion KRW project to build the nation’s largest solar power complex with a capacity of 300 MW (7,200 GWh over 25 years) on 2.97 million square meters of abandoned salt fields and pastures in the Anmyeondo area of Taean County. According to the Board of Audit and Inspection, the project implementer faced difficulties from the start. Taean County opposed converting pasture land into development land for the solar project. The Board revealed that the implementer colluded with officials from the Ministry of Trade, Industry and Energy to obtain approval for the land conversion. According to the Board, in December 2018, Section Chief A of the Ministry introduced Project Manager B, a colleague from the same administrative exam cohort, to the implementer. Despite the Mountainous Area Management Act being amended to exclude solar power from important industrial facilities, Manager B sent a favorable legal interpretation letter applying the pre-amendment law to Taean County. Based on this, Taean County approved the land conversion and development.

Section Chiefs A and B retired on the same day in April 2019 and were re-employed as the implementer’s CEO and an executive of a partner company, respectively. After becoming CEO, Section Chief A conspired with Taean County officials to obtain exemption from the land restoration obligation by submitting a false restoration plan to the Chungnam Urban Planning Committee. According to the Board and the Joint Investigation Unit, the exemption benefit is estimated at about 780 million KRW. Both individuals deny the related allegations.

The Joint Investigation Unit raided the Ministry of Trade, Industry and Energy and Taean County Office on July 28 regarding these allegations. They seized offices and work computers of three Taean County officials and secured records related to the solar project promotion in the Anmyeondo area in 2018.

◆ Key Issues: Whether the Administrative Decision Was Routine and Proof of Quid Pro Quo = Experts identified whether the administrative decision was routine and whether quid pro quo can be proven as key issues. A lawyer specializing in public official corruption said, "When investigating favoritism-related corruption, prosecutors first check whether permits could have been granted without favoritism and whether quid pro quo can be proven. Even if legally possible, if the permit was practically denied for other reasons, prosecutors may face rebuttals like 'the permit was legally possible, so why would money be taken?' even if financial transactions are traced."

Lee Tae-ho, lead attorney at Law Firm Roel, said, "It must be examined whether public officials enabled something not allowed by regulations and whether abnormal financial transactions occurred. To verify such allegations, the prosecution likely conducted raids to secure physical evidence such as instructions from responsible officials and financial transaction records."