[After the Verdict] Why Did Cho Kuk's Younger Brother and Mother Shift Responsibility to Father Cho Byeon-hyun?

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[Asia Economy Reporter Seongpil Cho] The key figure in the corruption allegations surrounding the Ungdong Academy, operated by the family of former Minister of Justice Cho Kuk, is Cho Kwon. He filed a self-fraud lawsuit to embezzle money from Ungdong Academy. This fact was revealed during both the prosecution investigation and the court trial. However, during the trial, Cho argued, "I had a claim against my father, so when I demanded repayment, he told me he would transfer the construction payment claim of Ungdong Academy, so I should take it." He shifted the responsibility to his late father, Cho Byeon-hyun. Cho's mother, Park Jeong-sook, chairwoman of Ungdong Academy, also made similar statements in court. Park, who testified in the first trial, said about Cho, "He ruined himself because of his father."

Setting up a front and winning construction bids through 'self-bidding'

Cho Byeon-hyun. His name appears frequently in Cho's court rulings. According to the rulings, he was the chairman of Ungdong Academy. He served as chairman from 1985 to 2010. At the same time, Cho was the CEO of Goryeo General Construction. This company went bankrupt in November 1997, was deemed dissolved in December 2006, and completed liquidation registration in December 2009.

In 1996, while serving as chairman, Ungdong Academy commissioned the construction of new classrooms at Ungdong Middle School, which was the starting point of this case. The construction contract was awarded to Goryeo General Construction, where Cho was CEO. The contract was signed for a total construction amount of 3,660,920,000 KRW. Park, Cho's maternal uncle and then administrative director of Ungdong Academy, explained the situation in court as follows: "The contract amount was signed based on the bid amount submitted by Goryeo General Construction. Although it took the form of a bidding process, the other companies were essentially just fronts." In other words, it was a 'self-bidding' scheme.

To finance this construction, Ungdong Academy borrowed 3 billion KRW from Dongnam Bank in December 1995. Cho personally guaranteed the loan. However, Ungdong Academy failed to repay this loan, leaving it as debt. Korea Asset Management Corporation (KAMCO) acquired the claim, and the interest alone is now known to exceed 7 billion KRW. At the center of Ungdong Academy's astronomical debt was Cho, the former chairman.

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Construction nearing completion... suspicious cost increase

The original construction period for the new classrooms at Ungdong Middle School was from January 13, 1996, to June 30, 1997. However, in early 1997, Ungdong Academy and Goryeo General Construction agreed to change the contract. The construction period was extended to November 30, 1997, and the contract amount was increased to 4.8 billion KRW. Park, who was the administrative director at the time, felt this contract change was suspicious. "If I put my hand on my chest and think about it, the new classroom construction could have been completed with the 3 billion KRW loaned from the bank initially, so I thought it was strange," Park testified in court.

The details of the revised contract further support Park's testimony. The civil engineering costs increased significantly, from 1,849,960,000 KRW to 2,631,650,000 KRW, a rise of 781,680,000 KRW. This amount accounts for two-thirds of the total increase. However, at that time, the progress rate for civil engineering work was 100% for retaining wall construction and 95% for site preparation. This means there were no additional factors for civil engineering work. It was a 'suspicious' increase. The appellate court in Cho's trial also pointed out that "it cannot be ruled out that the civil engineering portion was excessively accounted for during the construction cost increase process."

Cho, the former chairman, never explained this increase. At the academy board meeting held in October 1998, after the completion of the new classroom construction, when a board member said, "The chairman should organize and keep accurate additional statements or contracts and submit them when the opportunity arises," he remained silent. Despite being asked to submit accurate construction cost-related documents at the board meeting, no verification or settlement was made. Ultimately, the actual amount spent on the new classroom construction at Ungdong Middle School remains shrouded in mystery even 23 years after completion. Construction personnel at the time also testified that they "did not know the exact amount."

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Additional 500 million KRW loan, backed by a 'strange' agreement

When the contract was changed and the construction amount increased, Ungdong Academy took an additional loan of 500 million KRW from Dongnam Bank in June 1998. The new classroom construction at Ungdong Middle School had already been completed by then. There was no longer a need for construction funds. However, behind this additional loan was a 'mutual agreement on advance payment of construction costs' made between Goryeo General Construction and Ungdong Academy at the time of the initial contract in 1996. This was an agreement that Cho publicly declared at the academy board meeting, saying, "I will take responsibility."

The content of the agreement was as follows: "Goryeo General Construction will bear all expenses related to the 3 billion KRW loan taken by Ungdong Academy from Dongnam Bank and the interest on the 3 billion KRW advance payment until the settlement after construction completion." ① Before even starting excavation, 3 billion KRW out of the total 3.6 billion KRW construction amount was paid in advance to Goryeo General Construction, and ② in return, Goryeo General Construction was to bear the bank interest on the 3 billion KRW loan.

Paying more than 80% of the total construction cost before starting the work ⓛ was unusual, but the bigger problem was ②. Contrary to the agreement, Goryeo General Construction did not bear the bank interest. Ungdong Academy paid all the interest. After completion, when the principal could not be repaid and interest accrued, they had to borrow again from Dongnam Bank.

Park, the maternal uncle, testified to the prosecution, "Ungdong Academy's payment of interest was taking on the debt that Goryeo General Construction was supposed to bear," and "The additional 500 million KRW loan from Dongnam Bank was also because Goryeo General Construction did not bear the interest, so the interest had to be paid with the additional loan." Based on this series of events and Park's testimony, the appellate court in Cho's trial pointed out that "Ungdong Academy should recover the interest it paid on behalf of Goryeo General Construction."

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The deceased have no voice... consequences of his absence

Cho, the former chairman, passed away in July 2013. The dead have no voice. His statements are not included in Cho's court rulings. The testimonies of Cho, Chairwoman Park, uncle Park, construction personnel who appeared as defendants, witnesses, or reference persons before the prosecution and court, and records such as the minutes of the Ungdong Academy board meetings admitted as evidence stand in for him.

Cho was involved in Cho's self-lawsuit as well. They deceived the world with fake contracts, claiming construction was done when it was not. In this trial, it was revealed that Cho had prepared a 'practice forged contract' to create the fake contract with Cho. Cho claimed in court, "I only received the claim from my father and was not involved in creating the false construction contract." On the other hand, Cho's defense cannot be found anywhere in the rulings.

If Cho had been alive, the trial would have been more fiercely contested, and Cho's rulings might have been different. In revealing the substantive truth in this case, Cho's absence plays this role. For Cho, it is a means of exercising his right to defense, and for the prosecution and court, it means the 'shortcut' to proving and judging the charges has disappeared. To use a chess analogy, it is like being without the 'rook.'