(ATTN: RECASTS lead; UPDATES with more info in paras 9-17; ADDS photo)
SEONGNAM/SEOUL, South Korea, Oct. 15 (Yonhap) -- Prosecutors raided the offices of Seongnam City Hall over a massive development corruption scandal Friday amid questions whether the investigation is headed all the way to former Mayor Lee Jae-myung, now presidential nominee of the ruling Democratic Party.
During the raid, a team of 20 prosecution investigators seized documents and other materials from offices in charge of the 2015 project aimed at developing the Daejang-dong district in Seongnam, south of Seoul, into apartment complexes.
Among the offices subject to the search were a city project team that had been in charge of establishing and authorizing details of the project as well as the network division containing digital data about the city's electronic decision-making process and e-mail communications.
The investigation is aimed at determining how a previously little-known asset firm, Hwacheon Daeyu, and its seven affiliates reaped profits of more than 1,000 times their investments after the firm was selected as a civilian partner for the project.
The raid came a day after the Seoul Central District Court rejected the prosecution's request for an arrest warrant for the firm's owner, Kim Man-bae, on bribery, breach of trust and embezzlement charges, saying there are insufficient grounds for his arrest.
Kim, a former journalist, allegedly colluded with Yoo Dong-gyu, then acting president of Seongnam Development Corp. in charge of the project, to engineer a contract between the two sides to remove a clause limiting the amount of profits that the firm could take from the project.
Yoo has already been arrested.
Prosecutors are zeroing in on the city government to look into whether it was also accountable as the entity with the power to manage and supervise the city development agency.
The main opposition People Power Party has claimed that Gyeonggi Gov. Lee, who won the ruling party's presidential nomination earlier this week, must have been deeply involved in the scandal as he was mayor of the city at the time.
Lee has flatly rejected such allegations as "fake news," arguing that he did not gain a single penny from the project and that the opposition party is raising allegations against him in an attempt to cover up its own wrongdoing.
One PPP lawmaker, Kwak Sang-do, gave up his parliamentary seat after revelations that his 32-year-old son received 5 billion won ($4.24 million) in severance pay from Hwacheon Daeyu after about seven years of work, an unreasonably high amount for an employee whose monthly salary was only about 3.8 million won.
Suspicions were that the severance pay was bribes to his father.
During Friday's raid, investigators tried to seize documents from the city's culture office amid suspicions that Kwak, who served on the parliamentary culture committee, could have helped the firm move ahead with the construction project without delay even if cultural relics were found at the site.
Gov. Lee later responded tersely to the news of the prosecution search.
"The search and seizure must have been necessary," he told reporters after attending a party event at the National Assembly in Seoul.
Asked to comment on the court's refusal to issue an arrest warrant for Kim, he said he does not know the situation very well.
The Gyeonggi governor has expressed regret over the scandal involving a project launched under his mayorship but has squarely denied his involvement.