Prosecutors on Tuesday arrested the manager of former President Lee Myung-bak’s assets under borrowed names as part of a probe into a corruption scandal surrounding auto parts maker DAS.

Lee Young-bae, chief of a DAS subcontractor, is charged with embezzling company money to accumulate some 6.5 billion won ($6.1 million) in slush funds.

Prosecutors suspect he laundered money for the former president.

Lee allegedly embezzled money by falsely claiming to have paid wages to Kwon Young-mi, the largest shareholder of the subcontractor and widow to the former president’s brother-in-law.

Last week, another man who is believed to have managed the former president’s assets was arrested on charges of destruction of evidence, embezzlement and breach of trust.


Lee Byung-mo, executive secretary of the Cheonggye Foundation, is suspected of disposing of ledgers with transaction records of the ex-president’s financial accounts held under borrowed names.

Prosecutors have questioned Lee over the 26.3 billion won in proceeds the ex-president’s family gained from the sale of a plot of land in southern Seoul in 1995.

Lee Sang-eun, the former president’s eldest brother and largest shareholder of DAS, has told the prosecution that he bought his stake in DAS with the money he earned from the land sale.

Prosecutors have obtained a statement from Lee Byung-mo saying that DAS and Lee Sang-eun’s stake in the land actually belonged to the former president.

The prosecution said it is considering summoning the ex-president for questioning in early March after the PyeongChang Winter Olympics ends Sunday.

A hard disk seized during a raid of Lee Byung-mo’s office contained compelling evidence that could prove the real ownership of DAS, according to the prosecution.

Lee also told prosecutors that billions of won from the proceeds of the land sale had been withdrawn to renovate the ex-president’s home in Nonhyeon-dong, southern Seoul, under his instructions between 2012 and 2013.

The longtime manager of the former president’s assets said the ex-president instructed the purchase of a majority stake in DAS using some of the 15 billion won Lee Sang-eun had earned from the land sale.

Prosecutors also said they found traces of another slush fund amassed at DAS, in addition to the 12 billion won in a secret fund they initially suspected. Prosecutors concluded that one of the bookkeepers at DAS embezzled the 12 billion won, confirming the findings by a special counsel that investigated the same case in 2008.

With two key managers of the former president’s assets arrested, the prosecution is expected to hasten its investigations into various suspicions against him.

Prosecutors and investigators at the Seoul Eastern District Prosecutors’ Office who have looked into the embezzlement cases at DAS will join the team handling all cases implicating former President Lee at the Seoul Central District Prosecutors’ Office.

The Seoul Central District Prosecutors’ Office has been investigating allegations that the ex-president abused his power to retrieve DAS’ investment in BBK, a firm run by his former business partner, and that the presidential office under Lee received “special activities” funds from the National Intelligence Service.

By Kim So-hyun (sophie@heraldcorp.com)