Samsung Subject of “Redevelopment Scandal” Suspicions

The Supreme Prosecutors’ Office, which is investigating the redevelopment projects scandal, is spreading its dragnet with reliable evidence that Samsung Corporation (E&C Group) made a gift of money worth over 100 million won to the redevelopment association president under the name of the association presidential election campaign fund to win the contract for redevelopment project of the Gileum 8 district, Seongbuk-gu, Seoul.

In case it is confirmed that the construction company gave the association president money and goods, Samsung Corporation, which had ranked second in the 2005~2006 construction capacity evaluation, could be subject to a business suspension, a disciplinary measure which would send shockwaves throughout the construction industry.

Prosecution secured e-mails about money given and received-

According to the prosecution and other sources yesterday, the prosecution’s investigation team reportedly collected emails confirming the fact that Samsung Corporation gave money to Jeong (65), the redevelopment association president of the Gileum 8 district, from August to September 2005 just before the redevelopment association presidential election, under the pretext of election campaign funding.

The prosecution arrested Jeong last December under suspicion of requesting and receiving election campaign funds just before the association presidential election from demolition businesses, and has been investigating suspicions of additional money transfer scandals involving him.

At the end of last month, the prosecution searched the Samsung Corporation’s Seongbuk office and discovered e-mails detailing money and gift deliveries.

The e-mails reportedly contained questions such as, “We gave money worth over 100 million won to Jeong with the election close at hand. Which law would this be contrary to?” and answers by a legal advisor saying, “It is illegal.”

The prosecution believes that the allegations are highly likely to be true, considering the e-mails specifying the money delivery situation in great detail and the legal advisor’s comment clearly confirming that it was against the law.

The prosecution is planning to summon and investigate the Samsung Corporation Seongbuk office chief and others one by one, and is considering expanding the investigation dragnet to redevelopment businesses in areas other than the Gileum 8 district, in which the Samsung Corporation has been involved.

The Supreme Prosecutors’ Office arrested executives of Isu Construction and SK Construction last August and December under suspicion of giving money and gifts to the association for contracts.

It was a performance achieved after intensive investigation for months after organizing a “redevelopment business-related scandal joint investigation office” last February. However, as the construction companies ranked below 10th in the construction capacity evaluation, it was repeatedly pointed out that, “The prosecution’s investigation was acquitting mammoth construction companies.”

However, Samsung Corporation, one of the largest construction companies in Korea, ranked first in the construction capacity evaluations in 2004 to 2005, which was when the prosecution started to speed up its investigations into redevelopment scandals involving construction companies.

The prosecution expects that this will be the most crucial investigation into redevelopment scandal cases because it will send a clear message to the industry that even top construction companies cannot get away with their bribery.”

It is also a point of concern whether the prosecution would subject the Samsung Corporation to charges of violating the Framework Act on the Construction Industry.

According to Article 38, Paragraph 2 of Framework Act on the Construction Industry effective on and after July 2005, the Ministry of Construction and Transportation can take disciplinary measures, including business suspension, if a construction company gives money and goods to an interested person for contracts on the basis of the amount given.

If it is uncovered that a construction company made a gift of money and goods worth 100 million won or more, the company could be subject to business suspension of up to eight months, during which the company will not be allowed to win new businesses. This will deal a serious blow to Samsung Corporation.

needjung@donga.com