(3rd LD) Key suspect in Seongnam land development scandal arrested

(ATTN: RECASTS headline, lead; UPDATES with details in para 3)

SEOUL, Oct. 3 (Yonhap) -- A Seoul court on Sunday issued an arrest warrant for a key suspect in the snowballing corruption scandal surrounding a lucrative land development project near Seoul over charges that he played key roles in helping a private asset management firm collect huge profits from the project.

Prosecutors requested an arrest warrant for Yoo Dong-gyu, former acting president of Seongnam Development Corp., on Saturday on charges of breach of trust and bribery in connection with the project to develop the Daejang-dong district in the city of Seongnam, south of Seoul, into apartment complexes.

On Sunday, the Seoul Central District Court issued the warrant for Yoon's arrest after questioning him for over an hour. The court ruled that Yoo posed a risk of flight and could destroy evidence.

The scandal centers on revelations that the previously unheard-of asset management firm, Hwacheon Daeyu, and its seven affiliates reaped profits of more than 1,000 times their investments after the firm was selected as a civilian partner for the 2015 project.

Yoo is suspected of involvement in the selection process as acting president of Seongnam Development Corp. and designing the profit distribution arrangements in a way that benefits the firm while inflicting losses to the city.

He was also accused of receiving 1.1 billion won (US$930,138) in kickbacks.

Yoo, however, has denied any wrongdoing.

The scandal has been the hottest issue in South Korea in recent weeks amid opposition accusations that Gyeonggi Province Gov. Lee Jae-myung, the front-runner in the ruling Democratic Party's presidential primary, is responsible as mayor of Seongnam at the time.

Yoo is considered a close associate of Lee, and it was when Lee was mayor that the Daejang-dong project was undertaken. Moreover, Hwacheon Daeyu is 100 percent owned by a former journalist who interviewed Lee seven months before establishing the firm.

The main opposition People Power Party (PPP) has accused Lee of masterminding the whole scheme, and called for an independent counsel investigation into the scandal while urging Lee to step down as presidential candidate.

However, Lee has categorically rejected all allegations as "fake news," including his relationship with Yoo, arguing that he gained not a single penny from the project and that the opposition party is raising allegations against him in an attempt to cover up its own wrongdoing.

He was referring to revelations that the 32-year-old son of former PPP lawmaker Kwak Sang-do received 5 billion won ($4.24 million) in severance pay from Hwacheon Daeyu after about seven years of work, an unreasonably high amount for an employee whose monthly salary was only about 3.8 million won ($3,213)

Critics claimed that the severance pay was nothing but bribes to his father.

After the revelations, Kwak left the PPP and ultimately gave up his parliamentary seat on Saturday.

The firm Hwacheon Daeyu is also suspected of paying high-profile, influential people in the legal community, like a former Supreme Court justice and a former special prosecutor, in the form of hiring them as legal advisers.

On Sunday, fresh allegations surfaced that the firm's owner, Kim Man-bae, gave 10 billion won to a relative of former special prosecutor Park Young-soo who looked into the corruption scandal involving former President Park Geun-hye.

That raised suspicions that some of the money could have flowed to Park.

Both Kim and Park denied the suspicions.

A lawyer for Kim claimed that the money was lent to the relative, surnamed Lee, in a completely lawful manner. Park also claimed that Lee is a very distant relative and he knows nothing about the transaction between the two.
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