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Published on Games Monitor (http://www.gamesmonitor.org.uk)

Pyeongchang2018 Olympics at the heart of South Korean corruption scandal

By Julian Cheyne
Created 27 Mar 2017 - 13:20

By Julian Cheyne and Rebecca Kim - Researcher at the Democracy & Social Movement Institute, SungkongHoe University, Seoul

Against the background of the all consuming scandal which has engulfed South Korea's now deposed President Park Pyeongchang2018 looms up as the next fixture in the Olympic murk. The scandal surrounding ex-President Park Guen-hye, her confidante, Choi Soon-sil, and South Korea’s secretive companies, or chaebols, such as Samsung, Hyundai, Lotte or Hanjin, has cast a light on the shadowy interactions between the government, the secret services and the chaebols, the companies which came to dominate the South Korean economy during the dictatorship of Park’s father, Park Jung-Hee.

Up until recently the media has paid little attention to Pyeongchang2018. The appalling destruction of the forest at Mount Gariwang [1] was almost entirely ignored. The Guardian [2] and Inside the Games [3] managed to report the destruction a year after it had happened while Associated Press [4] then presented the argument from the position of the skiers and designers who were all astonished that anyone could be bothered about the cutting down of a few trees! This is how seriously the sports world takes the IOC’s alleged commitment to its Third Dimension, the Environment.

In fact, from day one Pyeongchang2018 has revealed the workings of the crony state. Long before the present scandal erupted President Park’s friend Choi Soon-sil was one of those who were taking advantage of her connections to profit from the Olympic project, buying up and illegally developing land around the Olympic sites. Her activities at Pyeongchang only came to light with the recent revelations but this practice of taking advantage of inside knowledge at Pyeongchang was already known. When it became clear that, after its early failures to win the Winter Games, the South Korean Government would continue bidding for the Games regardless of how long it took to win the South Korean elite, including executives and families from the so-called chaebols took this as a signal to indulge in property speculation [5] in the area around Pyeongchang. By 2012 it was claimed land prices had increased by ten times.

This was followed by the notorious pardon issued to Lee Kun-hee [6], the former chair of Samsung, following his conviction for embezzlement and tax evasion. He was pardoned by the then South Korean President Lee Myung-bak with the specific purpose of winning the 2018 Winter Games [7], which was then achieved. He was one of South Korea’s two representatives on the International Olympic Committee IOC. Lee was never actually removed by the IOC, despite his conviction for corruption, instead he was allowed to voluntarily suspend himself. On being pardoned he was then restored to his full membership of the Committee [8]. As an IOC insider Lee was in an entirely different position from others who had sought to influence bids as at Salt Lake City. Despite the explicitly corrupt decision around his pardon and his continuing membership of the IOC there has been little or no investigation of how he fulfilled the task set him by the South Korean Government.

Allegations of corruption have also been made about the construction of a section of the high speed railway for the Games. Several companies, Hyundai Engineering, Doosan Engineering, Hanjin Heavy Industries and KCC Engineering, were raided in April 2016 over allegations of collusion in the awarding of railway contracts [9]. Despite these continuing allegations of interference and manipulation of contracts, including the activities of Ms Choi’s family, Pyeongchang2018 continues to insist the contracts are clean [10]. The IOC also insists none of this has any bearing on the Games.

In case it is thought that South Korea’s Winter Olympics are somehow peripheral to the fraud perpetrated by Choi Soon-sil, which has resulted in the downfall of ex-President Park, it is important to note that Choi specifically identified sports and the Pyeongchang Olympics as areas ripe for plucking. Furthermore it is also plain that the ex-President was party to these acts and that exercising influence over sport and Pyeongchang2018 was key to the struggles of the elite for power and money. Choi was not alone. As the fraudulent land deals demonstrate chaebol families and others in the elite were also keen to get in on the act. Her K-Sports Foundation was specifically aimed at sports and she deliberately used her influence to win contracts for the Pyeongchang Games. Her conflict with the Chair of Hanjin over both Olympic contracts and the refusal of Hanjin to kowtow to her demands for donations reveals the centrality of this project and how it was an open feast for the elite which she was determined to dominate.

Ms Choi had been busy setting up companies of all kinds, such as the Blue K. She decided she wanted to make some money out of the construction of the Pyeongchang Opening and Closing Ceremony Hall [11]. Blue K, a paper company, had gone into partnership with a Swiss company, Nussli. As an indication of her involvement in Choi's schemes, President Park attempted to force the Pyeongchang Committee for Organising the Olympic Games (POCOG) to award a contract to Nussli, which would have brought Choi a handsome reward. The Chair of POCOG, Cho Yang-ho, who was also the Chair of Hanjin shipping company, opposed Choi and refused to give Nussli a contract. In due course Cho resigned [12], supposedly because of problems at Hanjin. However, it has since turned out he did not resign but that he was forced out [13] following the intervention of another government minister, then Culture Minister Kim Jong-deok, as a result of Cho's disagreement with Ms Choi over Pyeongchang2018. Her power and influence in the government was revealed in her ability to get him sacked from his role in Pyeongchang2018. In fact, Choi continued her feud with Hanjin and its Chair, because Hanjin had also resisted her attempts to force it to donate to her foundations. Her interference is thought to have caused the abandonment of talks to arrange a bailout [14] for the company as it faced bankruptcy.

To further demonstrate the breadth and depth of this network of corruption and its relationship to sport and Pyeongchang2018 [15], the same Minister, Kim Jong-deok, who forced out Cho Yang-ho, is also accused of playing a part in the creation of Choi Soon-sil’s Mir and K Sports Foundations and helping Choi’s associates win bids or financial support for other culture or sports-related state projects. In addition it is alleged he gained a position as professor with the assistance of a friend of Choi, Cha Eun-taek, who had been a member of the Presidential Committee for Cultural Enrichment. Another person whom it is alleged Cha Eun-taek helped to become a professor was former Presidential Secretary of Education and culture Kim Sang-ryul, who also happened to be Cha’s uncle, and who in turn is accused of involvement in another scandal whereby Choi Soon-sil’s daughter Chung Yoo-ra was enabled to attend a prestigious university [16] and given undeserved grades. Chung Yoo-ra was also the beneficiary of Samsung’s generosity as part of its attempts to curry favour with Choi. Samsung is, of course, the principal South Korean Olympics sponsor. Chung Yoo-ra’s father, Chung Yoon-hoi, has also worked as a top aide for President Park. Kim Sang-ryul is also accused, along with his nephew Cha, of seeking to benefit from business rights for the 2018 Pyeongchang Winter Olympics.

The history of the Park/Choi scandal reaches back to the days of the Japanese occupation and the relationship between Choi Soon-sil’s father, Choi Tai-min, with Park Geun-hye’s father, the dictator Park Jung-hee. According to one of Choi Tai-min’s sons, Choi Jae-suk, Choi Tae-min was a friend of the dictator Park Jung-hee when they were both making a living as collaborators with the Japanese occupiers [17]. Choi later held positions in government after Park’s coup in 1961. In 1970 the pro-government Saemaul Village Movement [18] was set up. Alongside this other ‘nation-safeguarding and communism-eradicating’ civic foundations were established, such as the ‘Saemauem Bongsadan’ or ‘The Movement for a New Mind’ [19], which was the pro-government voluntary ‘civic education side’ of the Saemaul Movement. Park Geun-hye was established as its Honorary President. Choi Tae-min used this movement and his connection with its head, Park Geun-hye, to rake in funds ‘donated’ by Chaebol companies, a scam continued by his daughter Choi Soon-sil. Choi Soon-sil was a youth leader in the same movement, consolidating her relationship with Park Geun-hye. According to the 1979 Korean Central Intelligence Agency’s (KCIA) detailed report [20] on Choi Tae-min’s behaviour, he ran the above-mentioned ‘Saemauem Bongsadan’ foundation with the money he made Chaebol entrepreneurs pay by “appointing 10 big corporate figures as a steering committee.. and supplying operating funds from 60 leading businessmen, because they had to pay 20~30 million won each as a joining fee and 2 million won each as monthly membership fee.” This 1979 KCIA report found a total of 44 cases of misconduct Choi Tae-min and 300 million won worth of wrongfully accumulated funds. The total collected sums are believed to be huge. Choi’s family own hundreds of billions of won’s worth of real estate. This wealth has secretly been managed by the Choi’s family and Park Geun-hye.

It is widely known that during Park Jung-hee’s reign, Choi Soon-sil’s father, Choi Tai-min wielded “complete control over Park Geun-hye’s body and soul” as detailed in the 1974 US House of Representatives Fraser report [21]. Although the ‘official’ version of the relationship between Park Geun-hye and Choi Tae-min is that after the assassination of Park Geun-hye’s mother Yuk Young-soo in August 1974 Choi Tai-min presented himself as a spiritual counsellor to the grieving Park and Park found peace through him. Revelations by Choi’s son and other reports cast doubt on this version. It is now believed that Choi Tae-min was actively mobilised by Park Jung-hee to be a sort of ‘regime propaganda puppet’ to create a pro-government ‘mind revolution’ within the nation. A large portion of the civil sector, particularly the Christian section of society, was turned into a propaganda machine. Choi himself became the founder of the Yongsae-gyo sect [22], a pseudo Christian cult. Choi proclaimed himself to be Maitreya and told Park her mother had come to him in dreams. By ‘being her mother’, Choi could manipulate Park Guen-hye to do anything he wanted, a control referred to above.

Even from these early days his plan was to make Park Guen-hye President at some point in the future, a result which would further advance Choi Tae-min’s power and wealth. Indeed, as evidence that this was a real ambition, others in government had deep concerns about Choi’s influence. For example, Park Jung-hee’s assassin, Kim Jae-gyu [23], the head of the South Korean CIA, had cited his concern at Choi’s influence over Park’s daughter. Kim Jung-ryum, who was chief of staff to Park Jung-hee, also expressed concerns at how Park Guen-hye was being used to solicit favours for Choi’s companies. After Park Jung-hee was assassinated an unimaginable amount of secret funds are believed to have been transferred to Choi Tae-min and then, after Choi died, to his family. These funds were the means by which Choi’s family could successfully carry on with the project to make Park Geun-hye President. Choi Soon-sil, successor to Choi Tae-min, fulfilled this goal and, since the Park’s inauguration in early 2013, acted as the ‘real President’ of South Korea.

Of course there were plenty of others who still have nostalgic memories of the dictators, are part of their underground state structures like the secret services or, as with the chaebols, share interests, who were also happy to assist in this goal. One instance is how Park, the dictator’s daughter, was helped into power by her father’s secret services [24] who organised a massive campaign on social media to promote her election campaign. The chaebols, who had been so central to the rule of her father, could also look forward to further advancement at the hands of the daughter, even if this meant having to provide 'donations' to her friend. Pyeongchang2018 was at the heart of this wheeling and dealing in sharing out contracts and favours.

Choi Soon-sil’s ways of meddling followed the same pattern as those of her father. Just as her father had dominated Park Guen-hye so she took control of her and the Presidency. All President Park’s speeches had to be rewritten by Choi and her aides so that Choi’s family would continue to receive a flow of capital from the national budget through Choi’s ‘channels’. Just as her father, who had created foundations to scam the chaebols, in 2015 and 2016 Choi set up her two ‘foundations’ the Mir Foundation and the K-Sports Foundation, and their ‘son companies’ or subsidiaries, such as The Blue K and Widec, to channel funds from the national budget. Owned by Choi herself, the latter companies were founded to ‘siphon off funds’ from the two foundations. Just as before chaebol companies were coerced to ‘donate’.

The main chaebol contributor to Choi Soon-sil’s scams was Samsung, also South Korea’s principal Olympics sponsor. In 2016, the South Korean government made an ‘order’ to big corporations to contribute over 80 billion won (around $7 million) for the Mir and K-Sports Foundations. Two thirds of this was paid by Samsung. Of course, Samsung wanted something in return for this ‘donation’ and looked for state approval for a deal involving the merger of two Samsung group units, Cheil Industries and Samsung C&T, in 2015. The Ministry of Welfare was found to have pressured the National Pension Service (NPS), a major Samsung shareholder, to vote in favour of the deal. This merger was in support of the advancement of the next generation [25] of the Lee Samsung dynasty, Lee Jae-Yong, now under arrest, son of the convicted and pardoned Lee Kun-hee. As part of Samsung’s collaboration with Choi it also forked out other favours, such as ‘donating’ the enormous sum of €2.8m ($US3.1m) to a firm Choi had set up in Germany to fund her daughter’s interest in equestrianism [26]. This included providing 8 billion won to an equestrian team it was developing in Germany along with Core Sports International GmbH (later renamed Widec), a consulting firm controlled by Ms Choi. It is said most of the money went to Choi’s daughter and her equestrian coach, including buying a horse for one million euros. Once again sport provided the means for executing a corrupt deal.

Another fund created as part of these scams was the so-called ‘Creative Economy Innovation Centre’, which required large corporations to invest a total of 568.7 billion won (ca $512,154,159 - £407,587,290). The similarity in the style of operations between Choi Soon-sil and her father Choi Tai-min was clearly stated in the Special Prosecution’s requesting letter for an arrest warrant for Lee Jae-yong, the current Vice-Chairman of Samsung Group. They concluded that “President Park and Ms Choi have maintained a ‘very special’ political and economic partnership for the last few decades. They’ve developed into a ‘single economic community’.” Park and Choi’s government saw in State policy their ‘economic community’s revenue-making business model’. To fulfill the various ‘contracts’ they concluded with Chaebol companies Choi and Park used the Federation of the Korean Industries (FKI) [27] to twist the arms of the companies to force them to come up with the major items on their ‘wish list’.

The other way of amassing funds was to take as much as possible out of the national budget. According to the recently-published book [Choi Soon-sil and the Budget Robbers], Park’s statements, rewritten by Choi, were translated into a series of ‘VIP’s interests’ in the Ministries’ budget appropriations. These were then passed by the Ministry of Strategy and Finance, which sometimes even increased the budget allocations. In the 2017 National Budget alone these ‘VIP’ budget items amount to 546 billion won, most of it in the money allocated for the Ministry of Culture, Sports and Tourism and for the Ministry of Science, ICT and Future Planning. In the 2015-2017 National Budgets, the author found a total of 1.4 trillion won in the ‘Choi Soon-sil budget’. 130 billion won has since been cut, but 520 billion won is still awaiting execution.

Further cases show how Pyeongchang2018 and sports ventures in general feature in this rip off of public money. Another case involving Choi and her family’s involvement in Pyeongchang2018 concerned the budget appropriation in the case of Gangneung Ice Rink. This facility, currently under construction for the 2018 Pyeongchang Olympics, was scheduled to be torn down after the show as part of the original plan to save maintenance costs. However, suddenly in April last year the plan was changed and the Ice Rink was marked for retention. Right after this change Choi Soon-sil’s niece Jang Shi-ho created the ‘Korea Winter Sports Elite Center’ and immediately after that the 10th ‘Trade-Investment Promotion Meeting’ on 7th July 2016 agreed that sports facilities could be leased by private bodies not for just 25 years but for 50 years, with a right to renew the contract, and with the usage fee not of 1% but of 0.1% of market price. All maintenance work was the responsibility of central or local government, and the lessee was given the right to sublet. Jang Shi-ho’s company would be the beneficiary of these changes in its lease of the Gangneung Ice Rink. The Gangwon Domin Daily reported on 8th November last year that ‘the retention of the Gangneung Ice Rink was decided by the President’, that it would be operated by Jang Shi-ho’s company KWSEC and used by the Gangneug-based ‘Sportstoto’ Ice Sports Team, which was appointed as consignatory by the Ministry of Culture, Sports and Tourism in 2015.

On an even grander scale Choi would have benefited from a major project to build sports centres. The government had appointed Busan, Gwangju and Namwon Cities as ‘Metropolitan centres for K-Sports Club’, an act related to a mega state project of building 220 sports centres nationwide. In the national budgets between 2015-2017 spending on sports promotion-related projects was increased 21 times, with most of its projects awaiting execution.

Other Park and Choi’s policies, which would have further enriched them, included the creation of deregulated areas and the easement of regulations in 78 different areas, including the environment, education, medical services, information protection. Once again the Federation of Korean Industry was used to spearhead policy. It suggested the creation of Special Areas for the Service Industry, in December 2015. These were designed to foster competition between local governments and thus advance local deregulation. By May 2016 this had turned into a Regulation-Free Zones Bill. In between these dates in January 2016 Choi established her K-Sports Foundation. The ensuing deregulation would pave the way for unrestricted development by making it easier to lift ‘protected area’ designations in mountains (South Korea is covered in mountains), to simplify environmental impact assessment procedures, to remove controls over Green Belt land, to allow GMO testing and approval procedures, all of which it is feared by many would bring about massive sprawling development and consequent environmental destruction. The removal of the protection of the forest at Mount Gariwang for the Pyeongchang Olympics, which had enabled a key part of the forest to be cut down, provided the example for this further deregulation of land and the environment for development. This kleptocracy was determined to loot South Korea. The Pyeongchang Olympics is very much a part of this planned theft.

The Pyeongchang Games are not alone. New allegations of corruption regarding the Olympics have emerged at Tokyo2020 [28] where it was alleged illegal payments had been made to the son of Lamine Diack, former head of the IAAF and described by Seb Coe as his 'Spiritual President’ now now also under investigation for corruption [29]. His son, Papa Massata Diack, was alleged to have interfered in the 2020 Games bidding process after money was found to have been paid into his account by agents connected with or working for Tokyo2020. An ‘investigation’ [30] was launched by Tokyo2020, which unsurprisingly found Mr Diack innocent. Since then allegations of corruption have also emerged around the awarding of the 2016 Rio Games [31]. These investigations have impacted on the assessment process of the bids for the 2024 Summer Olympics [32]. The Tokyo2020 case is not yet concluded as investigations by French police [33] into both the 2016 and 2020 bids continue [34]. Allegations of corruption are also being levelled at the International Association of Athletics Federations (IAAF) [35], including its head, Lord Coe, infamous for his role in the shambles at London's Olympic stadium [36]. The allegations regarding the IAAF include the awarding of the 2011 IAAF World Championships [37] to the South Korean city of Daegu. Now the Budapest bid for the 2024 Games [38] is also under investigation for suspected corruption. Pyeongchang stands out with a corrupt IOC member being left in place during the bidding process for the 2018 Winter Games, even though it was known his whole reason for being pardoned was to ensure South Korea won the bid for those Games,

The extraordinary level of corruption around the Pyeongchang Games and how this relates to the wider scandal still resounds, its full impacts on the Games have yet to be felt. Samsung, the leading chaebol, which is at the heart of the scandal and whose chief is now under arrest, is the principal South Korean Olympics sponsor [39]. Other Pyeongchang chaebol sponsors like Lotte and LG are also deeply involved in the scandal. Korean Air, another Pyeongchang sponsor, is part of the troubled Hanjin chaebol. Ex-President Park has just had to face the prosecutors she had so assiduously avoided up till now. Demonstrations will continue, especially if the political establishment continues to show reluctance to pursue a full investigation. Further revelations about her and Choi will be followed by trials, all with unpredictable results.

Of course the IOC is determined to claim that this scandal has no bearing on the Games. On the contrary, the two are intimately related, as they were from the very beginning. The very nature of the Olympics project involves dealings with governments to get permission, support and funds for the Games. In the case of South Korea it even involved pardoning a corrupt member of the IOC. The wheeling and dealing involved goes to the heart of the political and economic system and provides the opportunity for those in the know and with the right connections to make a killing. Large areas of land have to be acquired to create Olympic Parks, the facilities and the Athletes’ Village, opening the way for speculators and special interests to profit, often with the use of state backed compulsory purchase and the eviction of those, usually poor, people in the way. Special Olympics Acts are passed for each Games removing protections and creating exceptions. Ironically these very exceptions enable states to remove restrictions, such as environmental protections, as at Mount Gariwang, even when the Olympics claims, farcically, to uphold such protections under its 3rd Dimension for the Protection of the Environment. The same special laws are used to strengthen the powers of the police and security forces, to prevent protest and other forms of disruption and to remove undesirables from the streets. Just the very scale and speed of construction required for the Games is a hazard, especially as it involves a sector of business notorious for the manipulation of contracts, even more so in a country like South Korea where business and government are so closely entangled.

The last two Olympics, the Summer Games at Rio [40] and the Winter Games at Sochi [41] have been extraordinary examples of failure on every level with cost overruns, environmental damage, corruption and widespread abuse of human rights. In December 2015, just over six months before the Rio Games, following the release of the Fourth Dossier on human rights violations, The Exclusion Games [42], which highlighted mass evictions, police violence, labour violations, the ‘cleansing’ of street children and the harassment of street traders, IOC President Richard Bach claimed he had never heard of human rights abuses [43] in the run up to the Games despite regular reports being provided in the media. Given that such violations are an inherent risk for a project of this kind his denial was both banal and shocking, a demonstration of callous indifference and contempt. For the IOC to pretend ignorance or to wash its hands of such abuses is itself a form of corruption.

The IOC and President Bach now claim the same ignorance for Pyeongchang2018. However, the corruption which started with the land deals, saw a corrupt IOC member being allowed to continue on the IOC to bring the Games to Korea and the use of the Games as a cash cow for a corrupt crony elite was always part and parcel of the bid. This corruption also underlay the withdrawal of the protection for the most important forest on the Korean peninsula at Mount Gariwang so that it could be destroyed for a three day event. Pyeongchang2018 is yet another nail in the coffin of the Olympic Movement.



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