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Police veterans group faces probe

Association accused of funding rallies through two shell companies
Oct 16,2017
As a part of its investigation into the former administration’s illegal funding of pro-government rallies, the prosecution is targeting the police veterans association and its affiliates.

Over the past few weeks, the prosecution has raided the offices of the Korea National Police Veterans Association and its affiliate companies, as well as the home of its former president, Koo Jae-tae, to investigate suspicious activities during the Park Geun-hye administration. The association of retired police troops has about 1.5 million members, including 150,000 active police officers.

Because it receives state subsidies and is regulated by the law, the association is required to maintain political neutrality. It, however, is suspected of having funded rallies to support the Park administration and criticize the liberal opposition parties.

The prosecution suspects that two of the association’s affiliated companies, Hankook Kyoungwoo Asset Management Company and Kyungan Company, only existed on paper and were created to support conservative civic groups and finance pro-government demonstrations. Prosecutors recently raided both companies, sources told the JoongAng Ilbo.

The prosecution said Koo, who served as the president of the police veterans association from May 2008 till May 2017 after revising the internal regulations, managed the funds of the two companies. He will soon be summoned for questioning.

The Seoul Central District Prosecutors’ Office already questioned officials from the association on Thursday about the organization’s management and operation. “Although the two companies do not have enough employees and business profiles, they appeared to have received investment and business favors from conglomerates,” a prosecution source told the JoongAng Ilbo.

The prosecution also suspects that Koo might have embezzled funds from the two companies.

Hankook Kyoungwoo AMC was established in 2009 with 7.1 billion won ($6.3 million) of capital. Koo invested 1.7 billion won of his own funds, while 300 million won came from the association. Conglomerates such as Hyundai Engineering and Construction and banks such as KB Kookmin Bank also made massive investments.

The prosecution obtained testimonies from the association’s officials that Koo actually ran the company, although a former bank executive was named as the CEO.

Hankook Kyoungwoo AMC attempted to win a project to modernize the National Police Hospital in 2013. The association pressured the National Police Agency to award the project to the company, claiming that former President Park made the order in Nov. 2013.

Just two days after Kang Shin-myung took office as the new police commissioner, Koo reportedly met with him on Aug. 27, 2017 and again pushed for the hospital to be modernized. The police agency attempted to award the project, but the National Police Hospital killed it, presenting legal evidence that it would be punished for breach of trust.

Hankook Kyoungwoo AMC also participated in the Gongdeok Station development project with the Korea National Police Veterans Association in 2010. The association won the 150 billion won project by forming a consortium with Sogang University. “Although the consortium had met minimum qualifications, it had no construction capability, so suspicions were raised even within the association about the integrity of the bid,” a former executive of the association said.

The association later sold the development rights to Hyosung Group in 2012 and received an expensive piece of real estate in return. “We are looking into suspicions that the Park administration gave favors to the association and its affiliates for their businesses,” said the prosecution source.

The prosecution is also looking into another affiliate of the association, Kyungan Company, which won massive scrap metal business projects from conglomerates. According to the prosecution, Hyundai Steel, an affiliate of Hyundai Motor Group, awarded a scrap metal import project to Kyungan Company from 2014 to 2016, worth billions of won.

Hyundai Motor Vice Chairman Kim Yong-hwan was recently questioned about the deal. Sources at the prosecution said the Park administration pressured Kim to award projects to the Korea National Police Veterans Association, and Hyundai Steel gave the scrap metal import deal to Kyungan Company.

Kyungan Company also had a similar deal with Daewoo Shipbuilding and Marine Engineering, the prosecution said. “By inserting an unnecessary company into the legitimate business deals, the association pocketed money from the conglomerates,” the prosecution source said.

The prosecution also obtained testimonies that the police veterans association paid 20,000 won per person to participants of the pro-Park demonstrations through Kyungan Company. Up to 50 million won was paid for each rally.

“We paid only some participants of the demonstrations,” said an executive of the association. “We didn’t give the money before the rallies. We gave them after demonstrations for transportation and meals.”

He also said the association’s real estate projects were legitimate.

BY SER MYO-JA, SOHN KOOK-HEE [ser.myoja@joongang.co.kr]