2/23/2007

153 indicted in gaming scandal

Korea Herald Feb. 23, 2007

'Sea Story' scandal nabs 153


Prosecutors said today they have arrested 45 people and indicted 108 without detention in connection with an illegal arcade gaming scandal that erupted last year.

The Seoul Central District Prosecutors' Office today announced the results of its six-month probe into the "Sea Story" scandal, involving lawmakers, high-ranking government officials, gang members, arcade businesspeople and gift certificate issuers.

A popular video slot game, "The Sea Story" was outlawed last year because arcades were found to be rigging the machines to raise betting stakes above the legal limit. Prosecutors then launched extraordinary investigations after realizing many other gaming machines were also operated illegally across the nation.

Rep. Kim Jae-hong of the governing Uri Party was recently indicted without detention on charges of receiving 30 million won ($31,000) between last May and June from an arcade businessman in favor of influencing legislation to benefit the game industry.

Prosecutors have questioned 2,200 people, brought charges against a total of 153 people for the scandal, and sought to retrieve 137.7 billion won in revenues that were earned through illegal activities.

However, prosecutors have cleared Rep. Cho Sung-rai of the Uri Party, former Culture Minister Chung Dong-chea, and Rep. Park Hyeong-joon of the main opposition Grand National Party, of any wrong doing.

Park was accused of receiving kickbacks from the same businessman who lobbied Kim, but prosecutors said it was hard to prove that the kickbacks were in return for favors.

Prosecutors said in a statement that despite Chung's mismanagement of his subordinates and his role in letting illegal gaming machines spread nationwide, he should not be charged with dereliction of his duty. Chung formerly led the Culture Ministry between July 2004 and March 2006.

Prosecutors also judged that Cho had personally invested in gift certificate issuing companies, which distributed vouchers that were illegally used as winning chips to nationwide arcades.

In 2005, the government selected 19 companies and allowed them exclusive rights to distribute the gift certificates in gaming rooms across the nation, and officials of 17 companies have received criminal charges.

According to the National Intelligence Service, the illegal gambling market amounts to about 8.8 trillion won a year, with 5 trillion won from about 20,000 adult-only arcades, 3.6 trillion won from about 10,000 PC game parlors and 2 trillion won from about 500 illegal casino bars.

Also through gift certificates illegally exchanged for cash, the adult-only arcades make 4.5 trillion won a year, along with 4.3 trillion in PC game parlors.

It is illegal to exchange gift certificates for cash at the arcades, but the practice is widely carried out as arcade owners receive up to 10 percent of the exchanged amount for a commission.

The prosecution declared today it will continue to crack down the illegal gaming industry and investigate some politicians and government officials who are suspected of receiving illegal kickbacks.

By Annie I. Bang

(aibang@heraldm.com)

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SeanHayes@ipglegal.com