Leadership Change at the Central District Prosecutors' Office Cooperation Division... What’s the Future of Corporate Investigations?

The head of the Fair Trade Investigation Division (Gongjobu) at the Seoul Central District Prosecutors' Office, which has shaken the business world with intensive corporate investigations, has changed. As of the 25th, Deputy Chief Prosecutor Lee Jeong-seop (Judicial Research and Training Institute class 32) left Gongjobu and was appointed as the 2nd Deputy Chief Prosecutor of the Suwon District Prosecutors' Office, and Yong Seong-jin, Director of the Criminal Planning Division at the Ministry of Justice (class 33), was assigned as the new head of Gongjobu. Accordingly, it is expected that there will be considerable influence not only on the major ongoing corporate cases but also on future cases, drawing the attention of the business community.

According to the legal community on the 29th, after Deputy Chief Prosecutor Yong Seong-jin joined on the 25th, the Seoul Central District Prosecutors' Office Gongjobu reorganized its internal structure, reviewed ongoing cases, and began full-scale investigative work. It is expected to take more active steps after the Chuseok holiday.

Seoul Central District Prosecutors' Office Photo by Yonhap News

The business community has started to closely watch Deputy Chief Prosecutor Yong, a 'special investigation expert,' who newly commands Gongjobu. It is reported that they are tense, observing where the newly led Gongjobu will take its first steps. According to the legal community, although Deputy Chief Prosecutor Yong has no experience working in departments similar to the Fair Trade Investigation Division, he is evaluated to have demonstrated his capabilities by participating in and achieving results in large and important investigations such as the 2017 'State Affairs Manipulation' investigation team and the 2019 'Sewol Ferry Disaster Special Investigation Unit.' He began his prosecutor career in 2007 at the Daejeon District Prosecutors' Office and subsequently worked at the Busan District Prosecutors' Office, Seoul Central District Prosecutors' Office, Seoul Eastern District Prosecutors' Office, Jeju District Prosecutors' Office, and from July last year, served as the Director of the Criminal Planning Division at the Ministry of Justice.

Among the cases Deputy Chief Prosecutor Yong will lead going forward, much attention is focused on the 'KT Bid Rigging' case. Gongjobu conducted raids on about 7 to 8 locations on the 28th of last month, including KT headquarters, KT Cloud, the residence of former KT CEO Yoon Kyung-rim, the office of subsidiary Open Cloud Lab (formerly Spark & Associates), and accounting firm A, and is analyzing the secured materials while reviewing the schedule for further investigation.

There is a possibility that they will actively pursue the detention of former KT CEO Koo Hyun-mo and other executives. The legal community also analyzes that the investigation may simultaneously target Hyundai Motor Group. The prosecution is examining the possibility that KT Cloud paid tens of billions of won above the normal corporate value when purchasing 100% of Spark's shares for 20.68 billion won in September last year. At that time, former CEO Koo and former CEO Yoon, who were involved in decision-making as KT CEO and Group Transformation Division head respectively, were booked as suspects for breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes. Spark is a company established by the brother-in-law of Hyundai Motor Group Chairman Chung Eui-sun. The prosecution believes there is a possibility that KT made such an investment as a favor related to Hyundai Motor's purchase in July 2021 of a company owned by former CEO Koo's brother, who was in financial difficulty.

The 'real estate transaction corruption' suspicion between the resort condo operator Ananti and Samsung Life Insurance is reported to be nearing judicial processing. The core of this suspicion is that Ananti purchased land and buildings in Songpa-gu, Seoul, in April 2009 for a total purchase price of 50 billion won and made a contract to resell them to Samsung Life Insurance under a conditional completion agreement in June of the same year, before paying the final balance, thereby earning huge profits. At that time, the real estate was planned to be developed into a 17-story building above ground and 7 stories underground, and Ananti reportedly recorded sales of about 97 billion won, nearly double the real estate purchase price, from this transaction. In addition, allegations of 'unfair transactions' between Hankook Tire and Woam Construction, as well as suspicions of missing rebar and bid rigging among construction companies, are also under investigation by Gongjobu.