The same scandal saw prosecutors carry out a morning swoop on the offices of South Korea's largest conglomerate Samsung Electronics, looking for incriminating documents.
Weakened South Korean president takes another hit
South Korean President Park Geun-Hye on Tuesday agreed to dump her nominee for prime minister and cede control of some state affairs in a major climbdown forced by a corruption scandal battering her administration.
South Korea's President Park Geun-Hye bows prior to delivering an address to the nation, at the presidential Blue House in Seoul, on November 4, 2016
In a significant political concession, Park told the speaker of the National Assembly she would accept a prime minister chosen by the opposition-controlled legislature "and let him control the cabinet".
The premiership is normally a largely symbolic post in South Korea, where power is firmly concentrated on the executive.
It was a double surrender by Park -- effectively jettisoning her own choice for prime minister and relinquishing some of her extensive powers to whoever parliament puts forward.
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Her climbdown underlined just how weakened she has been by the scandal involving a close personal friend, Choi Soon-Sil, who has been arrested on charges of fraud and abuse of power.
The charges relate to allegations that Choi leveraged her personal relationship with Park to coerce donations from large companies like Samsung to non-profit foundations which she set up and used for personal gain.
She is also accused of interfering in government affairs, including the nomination of senior officials.
Lurid reports of the unhealthy influence Choi wielded over Park have sent the president's approval ratings plunging to record lows and triggered mass street protests calling on her to resign.
In a bid to restore public trust, Park reshuffled her advisers and senior cabinet members, and nominated a liberal candidate for prime minister from outside her conservative Saenuri Party.
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But opposition parties had vowed to block her nominee on the grounds they were not properly consulted.
' Crisis of state'
During their meeting, parliament speaker Chung Sye-Kyun told Park her biggest priority should be to alleviate widespread public concern and anxiety.
"The president's crisis is the crisis of state affairs and the crisis of the nation," Chung said, according to an official transcript.
"If the National Assembly recommends a nominee, you must appoint him and grant him authority and ensure there will be no disputes in the future about his authority," he added.
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Park has just over a year of her single five-year term left to serve, and there are concerns the scandal will paralyse government at a time of slowing economic growth, rising unemployment and elevated military tensions with North Korea.
Opposition parties have suggested Park should take a back seat in state affairs for the remainder of her term and leave the daily running of the country to a bipartisan cabinet.
A spokesman for the main opposition Democratic Party said Park's concession on Tuesday was too "ambiguous" and urged her to confirm that the new prime minister would be allowed to function without interference.
Lee Nae-Young, a political science professor at Korea University, said conceding to parliament was a "last-ditch effort" to prevent the crisis spiralling out of control.
"It's still not exactly clear to what extent she will end up devolving some of her powers, and that is going to take some consultations with the political parties," Lee said.
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"The real problem is that a lot of people feel she has lost her moral authority to rule as president."
The widening scope of a formal investigation into Choi Soon-Sil saw prosecutors raid the offices of Samsung Electronics in Seoul earlier Tuesday.
Media reports have suggested the company may have funnelled as much as 2.8 million euros ($3.1 million) to a company Choi set up in Germany to bankroll her daughter's equestrian training.
Samsung, which is still reeling from its own crisis triggered by exploding Galaxy Note 7 smartphones, has said it will cooperate with any investigations.
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