Prosecution probes first lady on Dior bag scandal, alleged stock manipulation

Questioning of first lady conducted without prior notice to Supreme Prosecutors' Office

First lady Kim Keon Hee arrives in Honolulu, Hawaii to accompany President Yoon Suk Yeol on his visit there on July 15. (Yonhap)

Prosecutors questioned First Lady Kim Keon Hee face-to-face for the first time from Saturday to early Sunday on allegations of her involvement in a stock manipulation case, as well as receiving a Christian Dior handbag and other luxury gifts in exchange for favors, the South Korean prosecution confirmed Sunday.

The Seoul Central District Prosecutors Office announced Sunday that Kim was questioned for around 12 hours, from 1:30 p.m. Saturday to 1:20 a.m. Sunday, at an undisclosed government building behind closed doors "for security and safety reasons."

This marks the first time in history that the wife of a sitting president has been summoned for a prosecution investigation.

An official from the Supreme Prosecutors' Office, speaking to The Korea Herald on Sunday on condition of anonymity, confirmed that "neither Prosecutor General (Lee One-seok) nor any executive at the Supreme Prosecutors' Office was informed about the process of Kim's investigation."

"The Seoul Central District Prosecutors' Office only notified the Supreme Prosecutors' Office when the questioning was nearing its conclusion," the official said.

An anonymous official from the Seoul Central District Prosecutors' Office confirmed to The Korea Herald that the questioning began with the Deutsch Motors stock manipulation allegations.

Later, while examining the luxury handbag allegations, the Seoul Central District Prosecutors' Office informed the Supreme Prosecutors' Office of the questioning, which occurred close to midnight.

The prosecutor general does not have the authority to direct investigations in the Deutsch Motors stock manipulation case, however.

The authority was removed in 2020 when then-Justice Minister Choo Mi-ae exercised her power to strip then-Prosecutor General Yoon Suk Yeol, who is now the South Korean president, of control over the case. The authority has not been reinstated since.

Kim's legal representative, lawyer Choi Ji-woo, stated Sunday, "Kim diligently cooperated with the investigation and truthfully testified to all the facts." He added that she had fully explained her position.

The South Korean presidential office declined to comment on the matter.

"The decision for the legal representative to make a statement, rather than the presidential office, was based on the judgment that it would be inappropriate for the presidential office to directly comment on an ongoing investigation by the prosecution," a South Korean presidential official, who wished to remain anonymous, said during a press briefing.

Kim has been accused of manipulating the stock prices of Deutsch Motors Inc., a BMW dealer, from 2009 to 2012. Kim allegedly conspired with Deutsch Motors Chairman Kwon Oh-soo and trader Lee Jong-ho, former CEO of Black Pearl Invest and known as the “control tower” of the scheme.

Therefore, prosecutors focused on the circumstances and extent of her involvement in the Deutsch Motors stock transactions during the questioning, according to multiple local reports. This included questions about her role as a main investor, her ties with the chief conspirators, and her account usage.

The investigation into Deutsch Motors began in April 2020 after Choe Kang-wook, a former National Assembly lawmaker, filed a complaint against Kim for alleged violations of the Capital Market Act.

The scandal also centers on accusations that Kim illegally received a Dior handbag worth about 3 million won ($2,158) and other expensive gifts from Korean American pastor Choi Jae-young in September 2022, allegedly in exchange for favors.

Kim's close aide, surnamed Yoo, conceded during questioning in early July that the first lady did receive the handbag but claimed she ordered it returned to the pastor the same day. However, Yoo said she forgot to return it because of other tasks, and the handbag has since remained unused and stored by the presidential office, emphasizing that there was no intent to use the bag.

During the questioning, prosecutors mainly focused on how the bag was received and any solicitations made by Choi. South Korea's local media reports suggested that the prosecutors mainly examined whether receiving the Dior handbag from Pastor Choi constituted a violation of the Improper Solicitation and Graft Act.

The luxury handbag investigation began in December last year when Baek Eun-jong, head of the media outlet Voice of Seoul, accused Kim of violating the Improper Solicitation and Graft Act.

In November 2023, Voice of Seoul, a liberal YouTube-based news channel, published a video showing Choi handing over a Dior handbag worth about 3 million won to Kim during their September 2022 meeting in Seoul. The pastor secretly filmed the video with a camera disguised as a watch, and the bag was reportedly provided by Voice of Seoul.

Kim is the third first lady in South Korean history to face questioning. Lee Soon-ja, wife of authoritarian leader Chun Doo-hwan, was questioned in 2004 regarding Chun's slush fund case, and Kwon Yang-sook, wife of former President Roh Moo-hyun, was investigated in 2009 in connection with an alleged graft scandal involving her family. However, both Lee and Kwon were questioned as witnesses.

Jung Min-kyung contributed to this report.

By Lee Jaeeun(jenn@heraldcorp.com)