Request for Public Audit on Illegality in KDB's Sale of Daewoo Construction

Filed a Public Interest Audit Request with the Board of Audit and Inspection... "Please Investigate Whether There Was Any Illegal Activity"

[Asia Economy Reporter Park Sun-mi] Civil society organizations have filed a public interest audit request to examine whether there were any illegal acts related to the Korea Development Bank's (KDB) attempt to sell its stake in Daewoo Construction.

On the 24th, civil society groups including the Financial Justice Solidarity and People's Solidarity for Participatory Democracy announced that they had requested a public interest audit from the Board of Audit and Inspection regarding KDB's attempt to sell Daewoo Construction, citing ▲ violations of competitive bidding procedures, ▲ illegality in the determination of the winning bid price and bidder, and ▲ breach of trust causing an expected 200 billion KRW loss to the national treasury.

At a press conference held in front of the Board of Audit and Inspection that morning, the groups stated, "KDB should have sold its shares through a competitive bidding process in accordance with the State Contract Act in principle, but it only borrowed the form of bidding and attempted to sell Daewoo Construction shares through a private contract by reducing the purchase prices of prospective buyers who were contacted in advance without any bidding announcement."

They added, "KDB claims that it cannot be involved as a third party in the sale of Daewoo Construction shares and that its subsidiary, KDB Investment, oversees everything, so the State Contract Act does not apply. However, in reality, KDB merely entrusted or delegated KDB Investment with the restructuring of Daewoo Construction, enhancing corporate value, and the procedures for selling its equity stake."

They continued, "The Daewoo Construction shares subject to sale are proprietary assets owned by KDB, which are national assets acquired with public funds. In their disposal, laws, procedures, and principles of recovering public funds must be considered from multiple perspectives, and it is not a matter for the delegated agency, KDB Investment, to make independent decisions," they added.

KDB Investment, the largest shareholder of Daewoo Construction, designated Jungheung Construction as the preferred bidder for the sale of Daewoo Construction last month. KDB Investment is a subsidiary dedicated to restructuring under KDB.

Controversy arose inside and outside the market as Jungheung Construction was designated the preferred bidder despite submitting a bid of 2.1 trillion KRW, which was 200 billion KRW lower than the bid during the previous main bidding held last month. There are suspicions that KDB sold Daewoo Construction shares to prospective buyers through a private contract, lowering the sale price by 200 billion KRW under the pretext that the sale was conducted by its subsidiary.