Governor Lee Jae-myung's Camp Files Complaint
Investigation Department to Be Decided Today
Attention on Whether 'Seongnam Utddeul' Will Be Raided
[Asia Economy Reporter Kim Hyung-min] The prosecution will begin a full-scale investigation into the so-called ‘Daejang-dong Development Favoritism’ allegations starting from the 23rd.
The Seoul Central District Prosecutors' Office will assign a department to handle the case on that day. This follows the complaint filed on the 19th by the election camp of Gyeonggi Province Governor Lee Jae-myung, a ruling party presidential candidate, against Kim Ki-hyun, the floor leader of the People Power Party, for violations of the Public Official Election Act and defamation under the Information and Communications Network Act.
The department likely to be assigned is one of the Public Investigation Division 2, which handles election cases; Public Investigation Division 1, which is investigating the ‘prosecution complaint manipulation’ allegations involving former Prosecutor General Yoon Seok-youl; or Criminal Division 1, which specializes in defamation cases.
Once the assignment is decided, the prosecution will first verify the facts surrounding the allegations. Although the complaint from Lee Jae-myung’s camp focuses on the spread of false information, the scope of the prosecution’s investigation is expected to be broader to confirm the basic details. Minister of Justice Park Beom-gye also stated on his way to work that morning, "(The Daejang-dong development allegations) are matters that must be swiftly clarified according to law and principles." Regarding whether the investigation details will be submitted to the Prosecutors’ Criminal Case Disclosure Deliberation Committee for public disclosure, Minister Park said, "We will continue to monitor," adding, "Since the system is still in its early stages, it is difficult to determine how it will specifically apply to current issues."
As the prosecution’s investigation intensifies, legal circles and city officials are saying, "The ‘Seongnam-eu-teul’ consortium should be investigated first." Seongnam-eu-teul is the company selected as the preferred negotiator in the Daejang-dong development project bid announced by Seongnam Urban Development Corporation in February 2015. This company was newly established around the time of the Daejang-dong development project and won the bid as a developer just one day after applying, raising suspicions about its identity. Among Seongnam-eu-teul’s shareholders, Hwacheon Daeyu Asset Management (Hwacheon Daeyu) has enjoyed an extraordinarily large profit from the Daejang-dong development project, which is difficult to understand logically, further fueling controversy. Hwacheon Daeyu was especially established by Kim, a former journalist who conducted a solo interview with Governor Lee.
A representative from a Seongnam civic group said, "The prosecution should quickly conduct a search and seizure of Seongnam-eu-teul to secure materials related to the allegations." Understanding the reasons and purposes behind the creation of Seongnam-eu-teul would enable a swift resolution of these suspicions. They also predicted, "It is possible that Seongnam Urban Development Corporation or Hwacheon Daeyu used Seongnam-eu-teul to collect and share prior information and accumulate materials related to the Daejang-dong development."
There are also many voices emphasizing the need to pay attention to the somewhat abnormal profit distribution structure of Seongnam-eu-teul, which participated in the public development project. Former Labor Party Policy Committee member Lee Jang-gyu argued on social media, "We must first reveal who made the strange decision to divide Seongnam-eu-teul’s shareholders into preferred and common stocks." According to Seongnam City, Seongnam-eu-teul’s shareholders are divided into preferred stocks (4,650,050,000 KRW) and common stocks (349,995,000 KRW). The preferred stocks are held mostly by Seongnam Urban Development Corporation with 53.76%, and the rest are held by financial institutions such as Hana Bank (15.06%). The common stocks are held by SK Securities with 85.72% and Hwacheon Daeyu with 14.28%. Although SK Securities and Hwacheon Daeyu hold only 7% of the total shares, they received dividends of 404 billion KRW from Seongnam-eu-teul over the past three years.
Lee said, "Generally, preferred stocks have no voting rights but receive higher dividends. However, Seongnam-eu-teul gave common stocks only to the two entities holding 7% of the shares, while the rest were assigned preferred stocks. The two common stockholders abused their voting rights to make an unreasonable decision to allocate most of the development profits as dividends to the common stocks." Lee and others view this as all stemming from the strange shareholder distribution structure of Seongnam-eu-teul. Furthermore, it is suspected that the division into preferred and common stocks was originally made to produce this outcome.
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