Suspicions are rising over a housing site development project in Daejang-dong, Seongnam, Gyeonggi Province, which was carried out when Gyeonggi Gov. Lee Jae-myung was Seongnam mayor.
Lee is also the front-runner of the ruling Democratic Party of Korea’s race to elect its presidential candidate.
Former Supreme Court Justice Kwon Soon-il resigned as adviser to asset management firm Hwacheon Daeyu last Friday, a day after news broke out that he had worked as one of its advisers.
The company is at the center of the controversy for reaping enormous profits from the development project.
Kwon is said to have played a decisive role in the Supreme Court’s decision in July last year to quash the appellate court’s conviction of Lee for violating election laws in running for Gyeonggi governor.
About two months later, Kwon retired, then in November last year, he got a job as an adviser to Hwacheon Daeyu.
The court of appeals had fined Lee 3 million won ($2,530), a sentence which invalidates his election as Gyeonggi governor, on charges of publicizing false information. In a TV election debate, he denied an opposition candidate’s argument that Lee played a part in the compulsory confinement of his elder brother at a psychiatric hospital.
The Supreme Court decision did not only enable Lee to avoid losing his governorship but also eliminated a big obstacle to his challenge to the presidency. When the bench was split 5-5, Kwon is said to have advanced an opinion to the effect that Lee is innocent.
Kwon said that while he was working as its adviser, he knew nothing about what Hwacheon Daeyu invested in and that he has never counseled on the project. But his argument is less convincing. Whether Lee exaggerated the merits of the project was another bone of contention in the Supreme Court trial of his false information publication.
Kwon argues his acceptance of the advisory job has nothing to do with the Supreme Court decision on Lee. But it is rare for a big wig in the legal profession, such as a former Supreme Court justice, to accept an advisory position from a small company with 14 employees.
As for the relationship between Hwacheon Daeyu and Lee, nothing else was revealed but the fact that he was mayor of the city where the project in question was executed. However, it would not be unreasonable to suspect if he had received a reward for the favorable ruling for Lee.
Controversies over Hwacheon Daeyu are piling up.
The project in question began in February 2015 when Lee was Seongnam mayor. A former reporter, who covered the legal field for about 30 years and also interviewed Lee before the project started, founded Hwacheon Daeyu with a capital of 50 million won, a week before a private-sector tender for the participation in the project began. Then, it joined a consortium, Seongnam Park Co., established as a special purpose company with a capital of 5 billion won.
Hwacheon Daeyu holds a slightly less than 1 percent stake in Seongnam Park Co. and six financial firms hold 43 percent. Seongnam Development Corp., fully owned by Seongnam City, is the major shareholder with a stake that exceeds just over 50 percent.
Seongnam Development Corp. selected Seongnam Park Co. as a preferred bidder for the project just a day after receiving its bid proposal.
Hwacheon Daeyu participated directly in constructing apartments on part of the project lot that it secured cheaply and sold them, earning a sales margin of 235.2 billion won.
Separately, the Hwacheon Daeyu owner and six other individuals whom he is said to have attracted as shareholders in six of seven Hwacheon Daeyu affiliates received 403.7 billion won in combined dividends for their total investment of 350 million won, which corresponds to a 7 percent stake in the consortium. The dividends taken by the seven individuals are as much as 1,153 times more than their investment. They also are reportedly more than double the dividends paid to the major shareholder, Seongnam Development Corp. This is not common sense.
It is questionable if these strange incidents could happen without certain favors from Seongnam City. Its mayor had authority to permit and approve construction works related to the project.
The incidents beg a series of questions: why and how were private-sector businesses involved in the project, how was Seongnam Park Co. selected as a preferred bidder, and how were Hwacheon Daeyu and the six affiliated investors able to take staggering dividends compared with other shareholders in Seongnam Park Co.
A thorough investigation is required.
By Korea Herald (email@example.com