①New Company, Rapid Selection of Woo협..Was There Preferential Treatment?
②Connection Between Hwacheondaeyu Owner and Governor Lee
③Huge Dividends and Appropriateness of Business Structure Also Issues
[Asia Economy Reporter Koo Chae-eun] Suspicions surrounding Gyeonggi Governor Lee Jae-myung's Pangyo Daejang District project are intensifying. The core issues in this matter are whether ① there were any special favors or corruption in the process where ‘Hwacheon Daeyu,’ a private investor in this project, earned huge profits, ② whether the real owner of Hwacheon Daeyu has a special relationship with Governor Lee, and ③ whether the business structure, which involved an investment of 50 million KRW yielding dividends of 57.7 billion KRW, was appropriate.
The Daejang-dong urban development project involved developing 5,903 households on approximately 910,000㎡ of land in Daejang-dong, Seongnam City, with an investment of 1.15 trillion KRW. The project was carried out by the special purpose company (SPC) ‘Seongnam’s Garden,’ and Hwacheon Daeyu, whose real owner is former journalist Mr. A, participated as a private investor. Governor Lee switched the project, which had been promoted as a private development, to a public development after taking office as mayor and began related work in 2015.
① Were there special favors? = The opposition party raises the possibility of special favors in the process of selecting Hwacheon Daeyu as a project participant. It is suspicious that the large-scale project plan, with land acquisition costs exceeding 1 trillion KRW, was announced on March 30, just four days after the application deadline (March 26, 2015), and the evaluation was completed in only three days. Also, the fact that a newly established company, only five months old, participated and was selected as a bidder for a large-scale development project is questionable.
However, the speed of selection and the fact that it was a new company alone cannot confirm special favors. A real estate developer said, "The announcement of the preferred bidder usually does not take long. Since the SPC was created solely for this project, it is natural that it was a new company, and because the bidding was conducted as a bank consortium, it is hard to say that a company without name value was hastily selected." To clarify the ‘Daejang-dong special favor suspicion,’ it must be proven that there was any improper solicitation or quid pro quo between Hwacheon Daeyu and Seongnam City or Governor Lee during the permit approval process.
Kim Ki-hyun, floor leader of the People Power Party, is delivering opening remarks at the 'Lee Jae-myung Gyeonggi Province Governor Daejang-dong Gate Truth Investigation Task Force' meeting held at the National Assembly on the 16th. Photo by Yoon Dong-joo doso7@
② Whether the owner has a special relationship with Governor Lee = There are also suspicions about a special relationship between former journalist Mr. A, the owner of Hwacheon Daeyu, and Governor Lee. It needs to be revealed whether the profits earned by Hwacheon Daeyu flow to Governor Lee or his close associates, similar to the cases of former President Lee Myung-bak’s DAS or BBK. However, so far, the only confirmed fact is that Mr. A interviewed Governor Lee in July 2014.
It is also an issue that shareholders who invested in SK Securities’ specific money trust are close associates of journalist Mr. A or legal professionals. The fact that the daughter of former special prosecutor Park Young-soo and the son of Kwak Sang-do of the People Power Party worked at Hwacheon Daeyu, and that former Supreme Court Justice Kwon Soon-il was employed there, raises questions about whether there were any employment solicitations or misconduct. This part also requires confirmation of collusion between Governor Lee or Seongnam City officials responsible for permits at the time for the ‘Daejang-dong special favor’ involving Governor Lee to be established.
③ Was the profit-making process lawful? = The fact that Hwacheon Daeyu invested 50 million KRW and received dividends of 57.7 billion KRW over three years, earning more than 1,000 times the investment, is controversial. The project aimed to recover land development profits for the public and distribute benefits to Seongnam citizens, but the fact that a private company earned huge profits in the process contradicts Governor Lee’s stance against real estate unearned income.
However, Governor Lee’s side argues that the fact that the private developer made ‘huge capital gains’ and whether there was ‘improper conduct or special favors’ in Seongnam City’s selection process should be judged separately. The project started in 2015 when there were many unsold properties, and as the real estate market improved, Hwacheon Daeyu earned huge profits through a ‘high-risk, high-return’ approach, but there was no procedural unfairness or misconduct. The Open Camp emphasizes, "If there had been any problems, they would have surfaced earlier while Governor Lee was being targeted by opposition investigations."
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