Head of major lobby group claims financial impropriety between corporations and government

Returning from a board meeting of South Korean steel giant POSCO last November, director Bahk Byong-won said he was "dumbfounded" at a decision made there to donate 3 billion won ($2.61 million) to a recently set up non-profit foundation.

Bahk said he did not vote against the proposal because he "was told" it had to be approved, according to a transcript of comments he made at a separate closed-door meeting later that day at the Arts Council Korea. He did not specify who told him.

"I was not able to vote against it," Bahk was quoted as saying in the transcript, which was read out by an opposition lawmaker in parliament last month, and was confirmed to be accurate by the Arts Council Korea.

Prosecutors are now investigating people close to President Park Geun-hye in an influence-peddling case that has transfixed South Korea. An old friend of the president has been charged with abuse of power and fraud while a former aide has been charged with abuse of power and extortion after they helped raise 77.4 billion won ($67.75 million) from dozens of the country's biggest corporate groups on behalf of the two foundations.

Park has said she has not personally benefited but tens of thousands of people marched through Seoul on Saturday, demanding she quit.

Bahk's comments also shed light on the cozy ties between the government and South Korean conglomerates, known as "chaebol", that have dominated the country's economy for decades.

Bahk, who heads the Korea Employers Federation, a major business lobby group, said the government appeared to have "twisted the ankles" of the chaebol, pressuring them to provide large sums of money for the Mir foundation, set up to promote cultural exchanges with other countries.

Asked by Reuters if the transcript of his remarks was accurate, Bahk did not answer directly, and declined further comment.

The Federation of Korean Industries, which represents the country's biggest businesses and runs Mir, declined comment on Bahk's remarks. POSCO also declined comment.

In the 1980s, the Kukje Group, a conglomerate, refused to make charitable contributions to then-president Chun Doo-hwan's Ilhae Foundation, according to several media reports at the time.

Chun subsequently ordered the country's main bank to deny loans to the group, forcing it into bankruptcy, which the country's highest court later ruled was an infringement of Kukje's rights.

The two foundations that figure in the current case, Mir and K-Sports, are both run by the FKI business grouping. They have been given a vote of confidence by Park.

A prosecution source said that when the former presidential aide An was raising funds, he made clear that a "VIP" was interested in the projects and that the fundraising was for a good cause.

The source, who declined to be identified because the matter is under investigation, said the VIP was Park.

In remarks to senior advisers that her office later released to media, Park said: "The foundations are said to have been set up for my post-retirement but it is not true. If suspicions about such meaningful projects spread and personal attacks keep happening, it will throw cold water over the companies' pure will to contribute."

Officials from several chaebol have been questioned in the case although none have been accused of wrongdoing.

However, Chung Sun-sup, CEO of research firm Chaebul.com, said the scandal suggests that South Korea still had an "imperial" presidential system.

"We still live in an era where if a president says a word, the chaebol line up," Chung said.

Crisis costs UN chief pole position in race to be next president

UN Secretary-General Ban Ki-moon, once seen as the frontrunner to become the next president of South Korea if he decides to run, has slipped to second place in public support amid a political crisis engulfing the current leader, a poll shows.

Ban has been expected to join the conservative Saenuri Party of President Park Geun-hye if he runs for the top post in the election scheduled in December 2017, although the UN chief has yet to declare he is considering a run.

Support for Ban slipped to 17.1 percent in an opinion poll conducted last week according to Realmeter on Monday, the first time he has dropped from first place since June when South Korean pollsters began including him among potential candidates.

He was overtaken by the likely candidate for the opposition Democratic Party of Korea, Moon Jae-in, who received 20.9 percent, the poll, conducted with 2,528 people, showed.

Park's presidency has been rocked by a scandal involving a friend who is alleged to have used her closeness to the president to meddle in state affairs.

Ban's support base was expected primarily to be older voters and those in the conservative southeastern region, the same voter bloc that was core to Park's election win in 2012.

The decline in Ban's support came amid a rapid flight of Park and Saenuri supporters, Realmeter said in an analysis.

Park last week named a new prime minister and finance minister. But tens of thousands of people, possibly as many as 100,000 according to rally organizers, filled the streets of downtown Seoul on Saturday calling for Park to step down.

Reuters