After Ferry Deaths, Prosecutors See an Empire Built on Corruption

South Korean Coast Guard officers searched for missing passengers aboard a sunken ferry in the water off the southern coast near Jindo, South Korea, Thursday, April 17, 2014.
South Korean Coast Guard officers searched for missing passengers aboard a sunken ferry in the water off the southern coast near Jindo, South Korea, Thursday, April 17, 2014. –AP

SEOUL, South Korea — After all the lavish galas in his honor at landmarks like the Louvre and Versailles, the tens of thousands of devotees following his religious teachings for decades, the hundreds of homes and businesses reportedly stashed around the globe, Yoo Byung-eun ended up alone, his body splayed on its back and rotting in the weeds, empty liquor bottles by his side.

After a lifetime of craving recognition, of building a flock that showered him with cash and helped fund a business empire selling everything from toys to ships, Yoo found his moneymaking machine brought more than his own undoing, prosecutors say. It also contributed to one of the worst peacetime disasters in the nation’s history — the sinking of the ferry Sewol in April that killed 304 passengers, the vast majority of them high school students.


Millions of dollars from the web of companies, including the one that owns the ferry, went to Yoo, 73, and his two sons, prosecutors say, squeezed from the business through an increasingly perilous set of decisions that enriched his family at the expense of the passengers.

Scores of cabins and even an art gallery laden with marble were added to the ferry’s upper decks, making the ship top-heavy. So much extra cargo was crammed on board that there was sometimes no space to secure it properly with chains and lashings. And, prosecutors say, the ferry’s crucial ballast water, needed to balance all the additional weight, was deliberately drained so the vessel would not sit too low — a telltale sign to inspectors that the ferry was dangerously overloaded to bring in more money.

“It was a miracle that the ship actually sailed as far as it did; it could have tipped over any time,’’ said Kim Woo-sook, dean of the graduate school at Mokpo National Maritime University. “For them, cargo was cash.’’

Reinventing a Swindler

Scores of people have been arrested in connection with the sinking, including regulators, the captain, officers and members of the crew. But at the heart of the tragedy sits one of the nation’s most eccentric, and now reviled, families.


“The Yoo Byung-eun family, which is the root cause of this calamity, is inviting the ire of the people by flouting the law rather than repenting before the people and helping reveal the truth,’’ said President Park Geun-hye, who has also been widely criticized for her government’s failure to prevent the disaster, much less find Yoo before his death. His wife and two of his four children are in custody, and one son remains at large.

The Yoo family’s representatives did not provide answers to questions about the disaster, their businesses or their church, although many church members have said, however, that Park is trying to demonize the Yoos to deflect criticism from her government. But dozens of interviews with regulators, coast guard officials, prosecutors, dockworkers, crew members and family business associates seem to confirm the prosecutors’ contention that the Yoo family played a crucial role in the tragedy by cutting corners on the ferry’s safety, even as it was spending lavishly on itself.

The family used a sprawling group of at least 70 companies on three continents as a personal ATM, prosecutors say. It also spent tens of millions of dollars to lionize Yoo, a convicted swindler known best in South Korea in connection with the mass suicide of 32 members of a splinter group of his church more than two decades ago.

In one of their more damning findings, prosecutors say so much money was being siphoned away from the ferry company to Yoo and his relatives that it was starved of funds and spent just $2 last year on safety training for the Sewol’s crew members. The money went to buy a paper copy of a certificate.


During the accident, the chaos caused by the lack of training was clear. Some crew members admitted in interviews after the disaster that they had no idea what to do during the emergency and made fatal mistakes like repeatedly telling passengers over the intercom to “stay inside and wait’’ as the ship began to sink.

The ferry company was able to cut corners so dangerously because South Korea’s system for regulating ferries is riddled with loopholes, manpower shortages, petty corruption and a reliance on businesses to police themselves. Prosecutors and government auditors said coast guard officials turned a blind eye to problems after they had been wined and dined by the ferry company.

Members of Yoo’s church, known as Salvationists, say such discoveries are behind the government’s push to investigate the Yoos, saying it hopes to shift attention away not only from its own regulatory failures, but also the badly fumbled rescue attempt of the ferry, which had only 172 known survivors. The accident left Park’s government in disarray. Her prime minister tendered his resignation, and her approval ratings have plummeted.

Grand Childhood Ambitions

Yoo’s grand ambitions started in boyhood. A sickly child who suffered with tuberculosis, he dreamed of becoming “a sculptor greater than Michelangelo,’’ according to a collection of sermons published in 1981. But soon after high school in the 1960s, he found a new calling: religion.

As Yoo built his church, he embarked on a second career, as a business magnate. Starting in the 1970s, he turned the church into a source of cash, say investigators and former and current Salvationists, by persuading adherents to donate or invest their savings in his growing number of companies. In 1986, Yoo was suspected of used his growing political connections to get into the business of operating passenger vessels.

Even then, Yoo’s vessels faced criticism for overloading. Once, when his company tried to board more than twice one vessel’s maximum limit of 200 passengers during a busy holiday season, irate passengers almost rioted, said Lee Cheong, a former Salvationist who worked as a crewman on the boat.

Yoo’s ascent was halted in 1991, when he was arrested after the deaths of 32 members of a splinter group from the Salvationists. They were found dead in the attic of a factory cafeteria in 1987; some of them had been hanged. Yoo was not changed in connection with the deaths, ruling them a mass suicide that appeared to be the result of loans that the group could not repay.

But Yoo was convicted of defrauding his church members by improperly diverting money to his businesses. He spent four years in prison.

The prison sentence, and the subsequent collapse of his business group during the Asian financial crisis in the 1990s, were a fall from grace from which few Koreans expected him to recover. But prosecutors say he bounced back quickly upon release and found ways to avoid public scrutiny.

First, after his companies went bankrupt, he regained control of his businesses by having his two sons buy back companies from receivership at fire-sale prices, after a government recovery program had forgiven much of the debt, government officials and prosecutors say. With his sons and a daughter, Yoo then linked these companies in murky cross-shareholdings that prosecutors contend Yoo controlled by placing family members and loyal church believers in executive jobs.

Beginning of Trouble

In the ferry disaster, the Sewol’s troubles appear to have begun with the addition of the extra cabins and the art gallery above the main deck in late 2012, a change prosecutors say Yoo personally ordered.

The task of signing off on the new design fell to the Korean Register of Shipping, a private group the government licenses to certify ships as seaworthy, which assigned an inspector to ensure the remodel was done correctly. That inspector is now one of six regulators behind bars. His indictment says he approved the retrofitting without properly conducting a test to determine whether the renovated ship was stable.

The next layer of protection was supposed to come from the Korea Shipping Association, or KSA, which checks that ships are not overloaded. Critics have long said the shipping association should not monitor safety because it is an industry group funded by the shipping companies that it is supposed to monitor. KSA officials argued that shippers left them chronically deprived of the money needed to do thorough inspections.

The many ways in which the ferry company cheated came back to haunt the Sewol on April 16. As it headed toward the most dangerous part of the journey, a narrow waterway with treacherous currents, it was burdened with 2,142 metric tons of cargo, twice the maximum permitted, according to prosecutors. Beyond that, it had only 761 metric tons of ballast water, less than half the minimum required.

Then the ship’s helmsman turned too far to the right, more sharply than the 5-degree turn that the regular captain, who was not working that day, had recommended because the ship was so wobbly, prosecutors said.

Soon after the first coast guard rescue boat arrived, it reported that the ferry was listing by 60 degrees, making its top deck nearly perpendicular to the water. “A ship of that size should have taken several hours to flip, not less than two,’’ said Kim Sae-in, a coast guard official.

Three months later, salvage crews are still looking for 10 missing bodies, and prosecutors have frozen more than $100 million in assets from the extended Yoo family.

Yoo, who had spent so much time and money trying to rehabilitate his image, found himself South Korea’s most wanted man. His body was ultimately found in an apricot orchard, his corpse too decomposed to determine the cause of death.

In the end, the accident that toppled the Yoos involved just a tiny piece of their sprawling empire. Prosecutors say the practice of dangerously overloading the Sewol over 13 months had earned the ferry company a relatively paltry $2.9 million, or about $9,500 for every passenger who died.

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