[The Editors' Verdict] Is the Resignation of the Incheon Urban Corporation President the Answer?

Lee Seung-woo, President of Incheon Urban Corporation

[Asia Economy Reporter Park Hyesook] Lee Seung-woo, president of Incheon Urban Corporation, who is under pressure to resign from civic groups over the controversy surrounding the illegal sale of foreigner-only rental housing in Songdo, Incheon, has taken a firm stance, stating "There will be no voluntary resignation." Although it was initially reported that he would resign as of the 15th, he suddenly reversed this decision. He refuses to step down disgracefully, trapped in the suspicion frame imposed on him. Despite the fact that this position is one where one cannot complain even if forced to resign overnight by elected power, and facing such a situation, he rather intends to complete his three-year term. Having taken office in January last year, about half of his term remains.

On the 16th, at a business report session held by the Construction and Transportation Committee of the Incheon City Council, Lee stated, "This is not a personal corruption case," and "I distrust the suspicion frame created by the Incheon City Audit Office." This appears to be a direct confrontation with Incheon City, which holds the authority to appoint, dismiss, and effectively discipline him. Moreover, the labor union of Incheon Urban Corporation is also defending him. The corporation stated, "We reject the bad precedent of changing the president based solely on suspicions," and added, "The related suspicions will be revealed through police investigations, and we will humbly accept any disciplinary actions based on the results."

The issue originated when Incheon Urban Corporation sold 120 units of foreigner-only rental housing in Songdo Well County Complex 3 to a private business operator in 2017. Article 50-2 of the Public Housing Special Act (Restrictions on the Sale of Public Rental Housing) stipulates that public rental housing cannot be sold except when sold to another public housing operator or when the public housing operator converts the rental to sale after half of the rental obligation period has passed with the tenant's agreement. However, the corporation sold the public rental housing to a private business operator for 51.5 billion KRW.

There is also controversy over violation of the Economic Free Zone Act (Gyeongja Act), which until 2015 mandated that developers in economic free zones must supply 1-10% of housing units as foreigner-only rental apartments. Although this provision was deleted in the January 2016 amendment of the Gyeongja Act, the supplementary provisions require that projects approved before the amendment follow the previous regulations, making Songdo Well County Complex 3, which began construction in 2007, subject to this rule. Furthermore, although the Gyeongja Act was amended again in October 2018 to allow conversion to sale if the rental has not been leased for over a year after public announcement, the apartment was sold in 2017, before this amendment, so this does not apply either.

Civic groups demanded an audit from Incheon City, claiming that the sale to a private business operator without legal qualification was a special favor along with violations of related laws. The city conducted a special audit in March this year and concluded that there were illegalities in the sale process. Although the administrative disciplinary statute of limitations of three years had passed, resulting only in an "institutional warning" and "warning to the person in charge," the case expanded to include allegations of breach of duty by Incheon Urban Corporation, and police investigations are underway. At this point, pressure from civic groups intensified. They argue that Lee Seung-woo, who was the head of the development business division at the time of the rental apartment sale, gave a two-month extension on the balance payment date to the private business operator by his authority, which is a special favor, and demand that he take responsibility and resign.

However, it is questionable whether Lee should bear full responsibility as the civic groups claim, and whether that responsibility necessarily requires resignation. Incheon Urban Corporation sold the long-vacant rental apartments in 2017 after receiving legal advice that private sales were possible following the 2016 amendment of the Gyeongja Act. At that time, the corporation was in a management crisis due to excessive debt and was blamed as the main cause of Incheon City's total debt.

Also, the reduction of the sale price from 55.4 billion KRW announced at the bidding to 51.5 billion KRW was due to three failed auctions and was a decision made by the marketing division head acting as the president (vacant position) after going through the corporation's property review committee and management meetings. Although procedures such as management meetings and legal advice were followed according to company regulations, since the Incheon City audit concluded that the sale process violated regulations, the corporation cannot be exempt from responsibility. If the investigation reveals breach of duty, legal action against those involved will be inevitable.

However, at this stage, forcing the current president to resign over an issue with unclear responsibility seems excessive. Whether political or not, it is reported that high-ranking officials urged the corporation president to quietly step down, which has cast doubt on the purity of the city audit. Lee's mention of the "suspicion frame by the Audit Office" is for this reason. It is also true that Lee's position has been shaken as certain individuals were mentioned as successors around the time of the Incheon City audit, and he is not a close associate of the mayor.

Whether the president of Incheon Urban Corporation should resign can be demanded after the police investigation results are out, and it will not be too late. On the contrary, if the president's position becomes vacant now, it will be more difficult to manage the problematic rental housing. The priority is to promptly proceed with recovering the sale payments from the unqualified rental business operator and restore damages to tenants.

The Incheon City Council should focus on finding solutions together with the corporation rather than demanding the president's resignation out of concern for civic groups. There were problems in the public rental housing sale process, and if breach of duty is later confirmed, the city council also bears significant responsibility for failing to properly oversee Incheon Urban Corporation.