Jeongmu Committee Audit, Emerging Issues of Hwacheondaeyu and Private Equity Funds

Opposition Pushes for Financial Firm Witnesses in Hwacheon Daeyu Case
Private Equity Fund-Related Financial Holding Chair Also Requested

[Asia Economy Reporter Kiho Sung] As the National Assembly audit season approaches, witnesses related to the National Assembly’s Political Affairs Committee are being gradually selected. In particular, this audit is expected to feature a power struggle between the ruling and opposition parties over the ‘Hwacheon Daeyu controversy,’ along with witness requests related to the private equity fund scandal. If the witness selections proceed as planned, it will be inevitable for top financial sector leaders to appear in large numbers at the witness stand.

According to political circles on the 17th, the Political Affairs Committee held a plenary meeting the day before and passed the ‘2021 National Assembly Audit Plan Adoption Opinion.’ The committee also decided to summon representatives of companies that have been socially controversial as witnesses.

In the case of Kim Beom-su, Chairman of Kakao, a total of six lawmakers including Yoon Kwan-seok, Song Jae-hoo, Oh Ki-hyung, Yoon Doo-hyun, Woon Joo-kyung, and Yoon Chang-hyun have requested him as a witness. Questions are expected to focus on improving unfair trade practices by platform conglomerates, the expansion of business into multiple sectors, the rise in user fees due to monopolistic market structures, and his stance on the recently controversial Financial Consumer Protection Act (FCPA).

Regarding the ‘Merge Point incident’ that caused a refund chaos last month, Kwon Nam-hee, CEO of Merge Plus, will appear as a witness. The Political Affairs Committee has expressed its intention to conduct a parliamentary investigation into the root causes of this incident, including allegations of a Ponzi scheme.

The witnesses adopted the day before are related to the Fair Trade Commission audit scheduled for the 5th of next month. The ruling and opposition parties began discussions among their floor leaders on the 6th regarding witnesses for the Financial Services Commission and on the 7th for the Financial Supervisory Service. Regarding the private equity fund scandal, Kang Min-kook, a member of the People Power Party, has submitted a list of witnesses including Sohn Tae-seung, Chairman of Woori Financial Group. Sohn’s attendance is related to the overseas-linked derivative-linked fund (DLF) controversy.

A Political Affairs Committee official said, “We understand that efforts are underway to summon the remaining financial holding company chairpersons related to the private equity fund scandal as witnesses.” Regarding the DLF scandal, Woori and Hana Financial Groups are involved, while KB Kookmin, Shinhan, and NH Nonghyup are related to the private equity fund scandal. However, considering that financial holding company chairpersons have so far not appeared at audits despite hiring irregularities and the private equity fund scandal, it is widely expected that deciding on their summons will not be easy.

There is also a possibility that financial sector witnesses related to the recent hot issue of the Hwacheon Daeyu controversy in the Political Affairs Committee will be summoned. The opposition party is considering calling witnesses related to the ‘Hana Bank Consortium’ from the financial sector. The Hana Bank Consortium was one of three consortia competing in the bidding for the Daejang-dong development project in Seongnam-si, Gyeonggi-do, and ultimately succeeded in the bid. This consortium consists of Hana Bank, KB Kookmin Bank, IBK Industrial Bank of Korea, Dongyang Life Insurance, and Hana Asset Trust. An opposition party official from the Political Affairs Committee explained, “We are not calling them to embarrass anyone, but to hear the circumstances and positions of the related consortium at the time in order to verify the substantive truth of the incident.”

However, since the ruling party strongly opposes the Hwacheon Daeyu controversy, there are also views that witness selection will not be easy. A Political Affairs Committee official said, “The ruling and opposition floor leaders exchanged opinions once before, but no agreement was reached,” and predicted, “The decision on witness selection for the Financial Services Commission and Financial Supervisory Service will likely be made after Chuseok.”