Prosecutors raided Seongnam City Hall in connection with a land development corruption scandal, Friday, the day after a court dismissed a request for an arrest warrant for the key suspect.

A team of prosecutors and investigators searched the offices, seizing documents and other materials.

Seongnam City was responsible for licensing and approving various urban development projects in Daejang-dong, a district in Seongnam, Gyeonggi Province.

The city also oversaw the Seongnam Development Corporation, which spearheaded the construction of apartment complexes.

Yoo Dong-gyu, who served as acting president of the SDC, has been arrested on charges of breach of trust and bribery.

The land development project, which kicked off in 2015 as a public-private partnership, has been at the center of the controversy due in part to the unusually large profit it generated for Hwacheon Daeyu and its seven affiliates, which reportedly brought in more than 1,000 times the initial investment.

That massive profit led to suspicions of bribery.

As prosecutors raided Seongnam City Hall, all eyes fell on Gyeonggi Gov. Lee Jae-myung, who was the mayor of Seongnam between 2014 and 2018. As such, he had the authority to approve or refuse construction permits for the project.
 

On Thursday, the Seoul Central District Court denied the prosecution’s request for an arrest warrant for key suspect Kim Man-bae, who is believed to be the founder and major stakeholder of Hwacheon Daeyu.

Prosecutors sought the warrant Tuesday, a day after questioning Kim about allegations that he had engaged in bribery, embezzlement and breach of trust.

Prosecutors said Kim had colluded with Yoo Dong-gyu and arranged a profit-sharing scheme that favored Hwacheon Daeyu, costing the Seongnam city government more than 110 billion won ($92 million). 

Kim was also suspected of bribing Yoo and now-independent lawmaker Kwak Sang-do, who defected from the main opposition People Power Party, in return for political and business favors.

But on Thursday, the court said there was insufficient justification for detaining Kim and a great need to guarantee his right to defend himself.

Major South Korean media outlets predicted that the prosecutors’ investigation would hit a snag in the aftermath of their failure to arrest Kim. The court decision drew blistering criticism from the People Power Party.

The Seoul Central District Prosecutors’ Office said Friday that it would continue to strictly and impartially uncover the truth behind the land development project. 

Prosecutors also said they would decide whether to file a new request for an arrest warrant for Kim after closely reviewing the grounds for its refusal.

Since a dedicated investigation team was launched in late September, prosecutors have widened their probe, summoning and questioning key figures and carrying out raids related to the snowballing land development scandal.

This week prosecutors accelerated the investigation after President Moon Jae-in ordered a “swift and thorough” probe into the scandal, in his first public message on the issue.

Related allegations have swept the political arena, with major figures from both the ruling and opposition blocs implicated. But presidential hopeful Lee Jae-myung has pledged to dispel public misunderstanding and suspicion about the project by attending parliamentary audits scheduled next week in his capacity as governor.