Prosecutors dismiss stock manipulation charges against first lady

Prosecutors decided Thursday not to indict first lady Kim Keon Hee over her alleged involvement in a stock price manipulation scandal involving Deutsch Motors, a BMW dealer.

First lady Kim Keon Hee boards a car after a ceremony marking Armed Forces Day at Seoul Air Base in Seongnam, Gyeonggi, on Oct. 1. [NEWS1]

Prosecutors decided Thursday not to indict first lady Kim Keon Hee over her alleged involvement in a stock price manipulation scandal involving Deutsch Motors, a BMW dealer.

The Seoul Central District Prosecutors' Office's Anti-corruption Division Two dismissed the charges against Kim regarding the alleged violation of the Financial Investment Services And Capital Markets Act. The prosecution concluded that Kim not only did not participate in artificially inflating the stock price of Deutsch Motors but was also unaware of the stock manipulation itself.

Kim was suspected of being the "financial backer" who provided funds during the process in which Kwon Oh-soo, the former chairman of Deutsch Motors, allegedly organized a stock manipulation scheme between 2009 and 2012.

Kim and her mother Choi Eun-soon, 77, were accused of making 2.3 billion won ($1.68 million) in ill-gotten gains from the alleged stock manipulation. The case against Choi was dismissed as well.

This investigation began in April 2020 following a complaint filed by former liberal Democratic Party (DP) Rep. Choi Kang-wook. Over four years and six months, the administration changed, leading to a reshuffling of the investigative team.

Kwon received a two-year suspended sentence for stock manipulation in February last year. An appellate court sentenced Kwon again in September this year with a three-year suspended sentence.

While the court acknowledged that the first lady’s accounts were frequently used by people involved in manipulating stocks, she was never indicted due to a lack of proof that she was aware of the scheme.

With the first lady being one of the subjects of the investigation, the prosecution faced ongoing controversies over its impartiality.

The prosecution’s decision on Thursday to dismiss the case comes after a four-hour meeting on Wednesday afternoon by the offices’ internal “Red Team.” The Red Team is a group within the organization tasked with intentionally voicing opposing opinions during the decision-making process.

To apply the charge of aiding and abetting, prosecutors must prove that the first lady was at least indirectly aware of Kwon's stock manipulation. However, the prosecution concluded that it is difficult to see that Kim recognized this and engaged in direct or indirect actions related to the stock manipulation.

On Thursday, the prosecution unusually distributed a press release that included detailed summaries of the statements made by each suspect in its investigation.

Democratic Party (DP) floor leader Park Chan-dae speaks at the National Assembly in Yeouido, western Seoul, on Sept. 4. [NEWS1]

"We are reintroducing the Kim Keon Hee special prosecutor bill to transparently reveal the full truth behind all the suspicions," said Rep. Park Chan-dae, the DP's floor leader, during a policy meeting at the National Assembly in Yeouido, western Seoul.

"Since it has been confirmed that the prosecution has no will to investigate, the DP will reveal the substantive truth through a Kim Keon Hee special prosecutor, the permanent special prosecutor and the National Assembly audit."

The DP reintroduced a special prosecutor bill on Thursday to conduct a comprehensive investigation into allegations related to Kim. This is the third time the liberal party introduced the bill.

Cho Kuk, the leader of the minor liberal Rebuilding Korea Party, criticized the prosecution's decision to clear Kim, calling it "rigged."

"Right after the Oct. 16 by-elections, they granted her a complete get-out-of-jail-free card," he said, "This further strengthens the need for a special prosecutor."

People Power Party (PPP) leader Han Dong-hoon speaks at the supreme council meeting held at the National Assembly, at Yeouido, western Seoul on Thursday. [JOONGANG ILBO]

Even the head of the conservative People Power Party (PPP) took a shot at the first lady.

"Kim should cease external activities as promised during the presidential campaign," PPP Chairman Han Dong-hoon said at a supreme council meeting held at the National Assembly Thursday.

Regarding the prosecution's decision, Han said, "We must wait and see if it is something that the public can accept."

Han said he wasn't "referring to any specific procedure,” when asked if his call for Kim to cooperate with the investigation was in consideration of the proposed special counsel law for Kim.

“There have been excessive accusations from the opposition on various issues, and there are also explanations we need to provide," he added.

On Monday, Han called for a reshuffle at the presidential office, expressing suspicions that Kim could be exercising influence over state affairs through a clique of officials in the Yoon Suk Yeol administration.

At the time, Han said Kim didn't hold any "official position" and argued that any political influence she allegedly wielded would therefore be unjustified. UPDATE, Oct. 17: Updated with responses from each party.

BY KIM MIN-YOUNG [kim.minyoung5@joongang.co.kr]