South Korea Under Scrutiny

South Korea's music industry has become the target of a sweeping government investigation into alleged bribery and corruption.

Since July 15, the Seoul District Prosecutors Office has been issuing summons to officials from various talent agencies, record labels, and TV music programs for questioning about large sums of money moved in dubious transactions.

Prosecutors searched four of the nation's largest entertainment agencies—SM Entertainment, Sidus, GM Planning, and Doremi—July 12. Eight executives from those companies have since been banned from leaving the country. One prosecutor says the office plans a wide-ranging continuing investigation, which could take a couple of months. "It will be in depth," the prosecutor says, "and will not involve just a token slap on the wrist."

Industry insiders claim the investigations center on "conflict of interest" stock sales, chart fixing, payola, and inappropriate lobbying for talent. Prosecutors have arrested Kim Jong-jin, managing director of M-Net, Korea's leading music-video cable channel. They allege he received more than 50 million won ($40,000) in bribes from various managers to promote their artists.

At the same time, the Fair Trade Commission (FTC), a state regulatory body, has announced that it is investigating SM Entertainment and eight other management companies for collusion and anti-competitive practices. The FTC is looking at the management companies to see whether they bought favors for their clients from the PDs and executives of broadcasting companies.