South Korean president orders full investigation

South Korean president orders full investigation

SEOUL (Reuter): South Korean President Kim Young-sam ordered a
full investigation yesterday into charges his predecessor and
close ally Roh Tae-woo operated a huge slush fund.

The allegations by Roh's former top security aide that he
managed a 48.5 billion won (US$63 million) fund for his ex-boss
sparked panic selling on the Seoul stock market yesterday.

In the first sign of public anger at the scandal, 300 stone-
hurling students fought battles with riot police, who retaliated
with tear gas, in the center of the southwestern city of Kwangju,
a police spokesman said.

The students demanded punishment for Roh, widely detested in
Kwangju for his role in crushing a civilian uprising against
military rule there in 1980.

Kim, now in New York attending United Nations 50th anniversary
celebrations, was quoted by Yonhap news agency as saying everyone
involved in the case should be investigated "irrespective of
their position".

Diplomats and political analysts said how Kim handled his
biggest crisis could determine the future of his ruling
Democratic Liberal Party, which faces parliamentary elections in
April next year.

Kim, the first civilian to be elected president in modern
times, has staked his political future on rooting out the
corruption he inherited from military-backed regimes.

"Payoffs and kickbacks have been an accepted way of doing
business in South Korea, at least under military-backed
governments," said one Asian diplomat. "President Kim Young-sam's
anti-corruption drive is once again on the line."

Roh has made no public comment since the scandal broke on
Thursday last week when an opposition lawmaker accused him of
controlling 400 billion won ($522 million) of slush money.

But his office has quoted him as denying any wrongdoing.

Roh's former aide, Lee Hyun-woo, headed the all-powerful
Agency for National Security Planning, Seoul's equivalent of the
U.S. Central Intelligence Agency, while Roh was president.

Banking and construction shares were hit hardest in the stock
market selloff amid fears an all-out investigation into financial
sleaze could embroil the banking industry and uncover evidence of
kickbacks among building companies.

"News that the former president amassed illicit funds was a
bombshell to the market," said a Hyundai Securities broker, who
declined to be named.

The composite index closed 23.11 points or 2.31 percent lower
at 976.39.

Opposition parties demanded Roh's arrest as fresh allegations
of corruption surfaced.

Shin Ki-ha, floor leader of the main opposition National
Congress for New Politics, told reporters he was informed that
31.9 billion won ($39 million), possibly political slush funds
belonging to Roh, was deposited in a Seoul branch of the Korea
First Bank.

A spokesman for the Korea First Bank branch in northern Seoul
said: "We cannot confirm the allegation yet. The only thing we
can say is that the branch is too small to receive such a huge
deposit."