April 24, 2024

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[THE INVESTOR] The scandal involving President Park Geun-hye and her confidante Choi Soon-sil is spreading to the chebols, raising concerns about the possibility of influence-peddling in major business deals.

The prosecution that is investigating allegations against Choi, has questioned executive level officials at Lotte and SK groups this week.

According to sources, the prosecution is planning to summon other executive members of conglomerates, such as CJ and Samsung, to question whether there was any undue pressure to collect funds and whether there were any presidential aides involved in the process.

Lotte Group, which reportedly contributed 1.7 billion won ($1.4 million) to the nonprofit K-Sports Foundation -- believed to have been run by Choi -- in January later decided to send an additional 7 billion won in May as part of the corporate social responsibility projects. The prosecution questioned two Lotte officials on Monday.

Also on Monday, the prosecution questioned SK Group’s senior executive, surnamed Park, to confirm earlier testimonies by the former secretary-general of K-Sports Foundation Jung Hyun-sik that he demanded a total of 8 billion won as investment from the company on behalf of Choi and former senior presidential secretary for policy coordination Ahn Chong-bum.

News reports have suggested that SK Group, the parent company of the telecommunication unit, instead offered 3 billion won, which was later allegedly turned down by Choi.

It is alleged that two nonprofit foundations -- K-Sports Foundation and Mir Foundation -- are controlled by Choi who collected some 77.4 billion won in funds from over 60 businesses through the Federation of Korean Industries. The business lobby’s vice chairman Lee Seung-cheol was also questioned by the prosecution over the weekend.

Critics point out that while SKT was preparing for the merger and acquisition of CJ HelloVision, SK Group was allegedly pressured to donate to the foundations.

During that time the Ministry of Science, ICT and Future Planning were deliberating over the application.

According to industry watchers, the ministry had been leaning towards the application at least until May. On July 4, the Fair Trade Commission announced disapproval for the deal after two months of deliberation. The FTC flatly denied that there was any influence in their decision.

The FTC on Tuesday released a statement denying the allegation of Choi’s involvement in the SKT-CJ M&A deal, saying “the decision was based on thorough analyses of domestic and overseas cases of mergers between cable channels and mobile carriers in order to prevent damage to consumers by a possibly monopolized market.”

A SKT spokesman on Tuesday also declined to comment about the ongoing speculations.

Meanwhile, according to data compiled by Chaebol.com and Solidarity for Economic Reform on Tuesday, a total of 53 local businesses made donations to Choi’s Mir and K-Sports foundations.

Hyundai Motor Company made the largest donations totaling 6.88 billion won, followed by 6.8 billion won by SK Hynix, 6 billion won by Samsung Electronics, 5.5 billion won by Samsung Life Insurance, 5.4 billion won by Samsung Fire & Marine Insurance, 4.9 billion won by Posco and LG Chem.

Controversy is expected to follow, since some of the corporations -- Hanwha Group, GS Engineering & Construction, LG Electronics, LG Innotek, LG Hausys, LS Cable & System and LS-Nikko Copper -- allegedly failed to disclose their donations in regulatory filings, the report said.

It added that 12 of the companies that donated to the foundations, were those that couldn’t pay their corporate income taxes last year. Korean Air, for instance, reportedly donated a total of 1 billion won to the two foundations even though the airliner wasn’t able to pay its corporate taxes for the past two years due to a 477 billion won deficit as of late 2015, it said.

Meanwhile, allegations have surfaced involving the current Agriculture Minister Kim Jae-soo, who headed Korea Agro-Fisheries & Food Trade Corporation, known as aT until this August.

Some opposition lawmakers claimed on Monday that aT had been making efforts to establish a Korean cooking course at Ecole Ferrandi, a renowned French culinary school. A memorandum of understanding was signed with the French school in November 2015. However it was not signed by aT, but by the Mir Foundation.

“Minister Kim, who was the CEO of aT, must have helped hand over the contract to Mir, being mindful of Cheong Wa Dae,” said Kim Han-jung, a representative of the Minjoo Party of Korea.

The Agriculture Ministry dismissed the suspicion in a press release on Monday, saying, “It is absurd to say Minister Kim is related to Mir Foundation.”

“The Ecole Ferrandi project was pushed by the ministry, not aT, and it has been halted at the government level since the project was small and there was no request from the school to extend it,” it said.

President Park went ahead with the designation of Kim as the minister despite vehement protest from the opposition parties citing alleged ethical lapses in September.

By Song Su-hyun/The Korea Herald (song@heraldcorp.com)