In CABEI’s Relationship with South Korea, a Potential Conflict of Interest

Delegates from the Central American Bank for Economic Integration were feted with traditional Korean dance numbers, drum music, and kimchi as they mingled at a 2021 event designed to showcase South Korean culture in the heart of Honduras’ capital.

It had taken decades for Central America’s main development bank, known by the acronym CABEI, to convince South Korea to join. Seoul finally became an “extra-regional partner” in 2019, in the hope that CABEI would help South Korean companies cash in on the increasing number of U.S. businesses moving their supply chains to Central America.

“Once again, we emphasize how Korea has helped Central America,” the bank’s president, Dante Mossi, said in a speech at the 2021 event.

“Even though they are our newest partner, they helped us during the COVID-19 emergency … They are also working on many innovations in the region, and we have just seen the beginning.”

The addition of South Korea — the second-largest of CABEI’s extra-regional donors after Taiwan — was a boon for the development bank. Seoul’s initial pledge to give the bank $450 million helped boost CABEI’s credit rating, supported a capital increase from $5 billion to $7 billion, and provided new funds for the bank to lend out.

But the influx of new money has also created new opportunities for consultants and advisers who can help CABEI spend the South Korean funds.

An investigation by OCCRP, Columbia Journalism Investigations, and KCIJ-Newstapa found some of those consultancies have ties to people who work with CABEI: a then advisor to the bank’s president on South Korea, Jason Oh, and his long-time associate Seung-yol Lee, a coordinator for the bank’s South Korean trust fund.

Together, three companies with links to Oh and Lee won $1.6 million in contracts with CABEI in 2020 and 2021 to help manage these South Korean funds, or to consult on “channeling resources” from South Korea to Central America, or “strengthen[ing] the political ties between CABEI, the SICA [Central America] region, and the Asia-Pacific.”

South Korean company documents do not show who owns these consultancies, though Oh and Lee held senior positions in some of them, and have worked closely with others. Neither of them replied to requests for comment.

Both Lee and Oh were working with CABEI at the time. The list of contractors shows Oh was hired as Mossi’s adviser in 2020 — and according to the president, he still works with the bank. Lee’s business profile says he started working for CABEI the same year, and he too remains a consultant to the bank.

Reporters found no evidence that Oh or Lee influenced how these contracts were awarded. However, experts who reviewed reporters’ findings said the setup should be investigated, because it may have violated CABEI’s conflict of interest policies.

Han-Beom You, the head of Transparency International’s South Korean chapter, told Newstapa it was a “classic conflict of interest.”

CABEI did not provide any comment for this story.

A ‘Stepping Stone’ Between Cultures

One of Seoul’s stated aims in joining CABEI was to help South Korean companies win more business in Central America.

Soon after becoming a member, its government set up the Korea-CABEI Partnership Single Donor Trust Fund (KTF) to provide $50 million in grants for the bank’s projects over the course of five years. At least 55 percent of that money was earmarked for South Korean companies, according to the rules of the fund. (In practice Korean companies have scooped up even more — close to 80 percent — according to the fund’s 2021 annual report.)

Though the KTF was managed by CABEI, former officials from the South Korean government took up prominent positions there. They included Kunmin Kim, previously a senior official from Korea’s Ministry of Economy, who became its administrator.

“Korean government personnel dispatched to CABEI… [will] serve as a stepping stone between the Korean economy and CABEI and the Central American economy,” he wrote in an article posted on the website of Korea’s Ministry of Foreign Affairs.

“Doing business in Central America through CABEI lowers political risks and increases stability and sustainability.”

Korean-American consultant Oh has been key in building CABEI’s relationship with South Korea. Pictures show him rubbing shoulders with top CABEI officials as far back as 2016. Multiple current and former officials at CABEI said he was instrumental in bringing South Korea onboard as a member.

Mossi said Oh was already a contractor for this purpose when he became the bank’s executive president, late in 2018. Oh was hired as Mossi’s adviser “in all matters and businesses related to the Republic of Korea” in 2020, according to a list of CABEI contractors.

“Getting to know Korea, you need someone to help you literally translate your way forward,” Mossi told OCCRP in an interview. “We would hire people to help with government relationships when we don’t have a physical presence in that country, that’s normal business.

Mossi added that Oh still works with CABEI today, and has acted as a contractor with both the finance office and the strategy unit.

But Oh hasn’t only helped CABEI do business with South Korea. Reporters found that consultancies where people close to him held senior positions — including Lee, his fellow consultant at CABEI — have also won contracts with the bank.

Oh and Lee have worked together for more than a decade at a series of consulting companies incorporated in both the U.S. and South Korea. They also shared an address: In 2011 and 2012, both of them listed the same residential apartment in documents related to two civil court cases in Washington, D.C. (Both cases were dropped.)

The same address was used to set up a U.S. consultancy called Logical Standard in 2010. Its incorporation records list its registered agent as Jason Oh, though they do not show who owns the company.

Two days after Logical Standard was registered, Lee used the same address again to register the domain of a website called logicstand.com. In the records, Lee says he represents a company called Kore Development Advisors — another U.S. consultancy where Oh was president and where Lee’s business profile says he was a director from 2011-2019.

Four years later, and thousands of miles away, Oh was also listed in company records as a director of another consultancy called Logical Standard — this one set up in South Korea.

On the face of it, this complicated paper trail linking Lee and Oh on both sides of the Pacific ends there, as both the U.S. and South Korean Logical Standards have now closed down. But reporters found clues that they have been reborn as one of the consultancies that won contracts from CABEI, a South Korean company named Logic Stand Co. Ltd.

Three people with knowledge of Logic Stand and the other consultancies that CABEI contracted said they worked closely with Oh’s company Kore Development Advisers, or Korda, even bidding on the same projects. Correspondence obtained by reporters shows the companies shared staff and collaborated together.

”I always wondered … how nobody noticed that it’s the same person” behind the companies, said one of the people, who asked not to be named to protect their career.

Approached for comment on this article, South Korea’s ministry of finance said the KTF was fully managed by CABEI, and the Korean government had no oversight over who it hired.

The bank “independently selects vendors according to internal regulations, and the Ministry of Economy and Finance has no separate management or supervision authority,” it said.

Mossi told OCCRP that Oh’s contract with CABEI will soon expire because the bank has now opened an office in South Korea.

When a reporter from Newstapa visited Korda and Logic Stand’s offices in late October, both were empty and their doors were locked. According to property listing agencies, both spaces were put up for rent in early October.

‘Lies, to be Brief’

Along with its influx of funds to CABEI, South Korea also provided money for COVID-19 relief after the pandemic hit the region in early March 2020.

Bank officials used their new Korean connections to obtain what were supposed to be cut-rate PCR tests that would help Central American countries diagnose new cases of the virus in the early days of the pandemic.

But an effort to procure the tests from South Korean companies ended in embarrassment — and a scathing internal audit that found ethical breaches — after they were found to be missing key pieces that rendered them unusable.

“[A]t the suggestion of our then, Korean Director, their government offered some test kits at the prices they would obtain them, and facilitated the name of several companies,” Mossi said.

Mossi delegated his adviser on South Korea, Oh, to approach suppliers and negotiate directly with them, according to an audit of the purchase obtained by reporters. CABEI ended up paying a South Korean company $2.1 million for PCR tests it planned to distribute to its member states.

But when the tests arrived in Costa Rica there was a problem: They were missing “extraction kits” — tubes containing swabs used to take a sample from the patient — and so were effectively useless.

“Unfortunately, the coronavirus tests donated — with generosity and the best intentions — by CABEI’s extra-regional partners to regional partners cannot be used as they are incomplete,” the bank’s then-director of Costa Rica, Ottón Solís, wrote in an email to Mossi on April 14, 2020.

Credit: @BCIE_Org Early in April 2020, CABEI posted a picture of Mossi, the then-president of Honduras, Juan Orlando Hernández, and Honduran health officials receiving a delivery of COVID-19 tests.

When Mossi responded that the kits had been requested by the health ministries of its members, Solís wrote back again — this time turning the words of his email red for emphasis — asking Mossi to share the “this mistaken request from the ministers in writing … in order to protect CABEI’s reputation.”

Mossi replied saying the tests had been requested at the “highest level” of the regional integration council, SICA, and “approved” by the council of health ministers of Central America, COMISCA. Any problems with the tests could be remedied by buying missing extraction kits, Mossi added.

“I think this is an opportunity to show that we can collaborate,” Mossi wrote to Solis.

But the audit found that Oh began negotiating to purchase the tests before CABEI’s directors had approved the purchase.

It also found that COMISCA had not, as Mossi claimed, signed off on the tests or even evaluated them in detail before the purchase — except to point out that they were missing a key part.

The audit pointed to both the “deficient professional performance of those responsible for the donation” and “ethical breaches” that were committed when trying to cover up the mistake.

“At various stages of the operation, intentionally erroneous information, concepts and opinions (lies to be brief) were expressed verbally and in writing,” wrote the bank’s chief ethics officer, recommending that a case be opened with CABEI’s ethics committee.

In an accompanying letter, he issued a “strong call to attention” to Mossi and other senior officials for buying the incomplete tests, denying it, and “repeatedly arguing” that COMISCA and regional governments had approved the purchase.

Mossi defended the decision to buy the tests, telling OCCRP that Oh had managed to negotiate a far better price from the South Korean suppliers than other alternatives that were available at the time.

In supplementary written remarks, he said: “CABEI’s test kits purchase was audited and found no wrongdoing.” He said the bank did consult with COMISCA about the tests, and had set up an expert panel to make the purchase on the regional health body’s advice.

CABEI’s board signed off on up to $2.3 million more to buy test and sampling kits in May 2020, more than doubling the original amount spent. Mossi said the second round of grants included missing extraction kits.

But by then, the auditor noted, the advantage of early testing had been lost.

Though CABEI was not specifically mentioned, questions have already been raised in South Korea’s Parliament about the lack of transparency around donations and loans that the government is giving to international development institutions.

In 2019, a member of parliament introduced a legal amendment seeking increased oversight of how much money was being given to such organizations. Though the finance ministry rejected the proposed change, officials acknowledged in their response to the motion that “there is no actual fiscal control” and that South Korea’s law on funding development banks “is being used to circumvent budget deliberation.”

“There is a need to improve the system so that unreasonable practices can be corrected and investment contributions can be managed and executed transparently,” said Hong Sung-kook, a lawmaker from the opposition party who has criticized the government’s contribution to international financial institutions.

Andrew Little is a reporting fellow for Columbia Journalism Investigations, an investigative reporting unit at the Columbia Journalism School.