Suspicion Grows Over the Establishment of 'Seongnam Urban Development Corporation' Based on Private Contractors' Thousands-Fold Profiteering

Seongnam City Council Opposition "Push to Include in Administrative Affairs Investigation"

On the 7th, members of the Seongnam Citizens' Coalition held a press conference in front of the National Assembly main gate, urging a special prosecutor regarding the so-called Seongnam Daejang-dong development project allegations.

It has been revealed that a small number of private investors participating in the Daejang-dong development project in Seongnam City earned nearly 1 trillion won in profits from dividends and sales revenue, raising suspicions about the establishment background of the Seongnam Urban Development Corporation related to this matter. The Seongnam Urban Development Corporation is identified as the place where various special favors occurred during the Daejang-dong development project, such as the removal of the excess profit recovery clause, changes in land use, and increases in floor area ratio.

According to the Seongnam City Council in Gyeonggi Province on the 10th, the opposition party in the city council has decided to include the establishment background of the Seongnam Urban Development Corporation in the scope of the 'Daejang-dong Special Favor Suspicion Administrative Investigation.'

This is because they believe that the passage of the ordinance establishing the Seongnam Urban Development Corporation, which was a conspiracy between Yoo Dong-gyu, former Planning Director of the Seongnam Urban Development Corporation and a key figure in the Daejang-dong special favor suspicion, and Choi Yoon-gil, former chairman of the city council, was the starting point of the Daejang-dong development.

When former Chairman Choi submitted the ordinance to the city council plenary session in February 2013, he had left the Saenuri Party and was an independent. The ordinance was approved with the support of Choi, two Saenuri Party council members, and members of the Democratic United Party.

These two Saenuri Party members also played a decisive role when the ordinance was approved in the standing committee. Later, they moved to the Unified Democratic Party and were elected as city and provincial council members. Among them, one’s younger sibling was employed by the Seongnam Urban Development Corporation. Additionally, it has been confirmed that former Chairman Choi is working at Hwacheon Daeyu, the asset management company of the Daejang-dong project.

Hwacheon Daeyu and Cheonhwa Dongin 1 to 7, which held only 1% and 6% equity stakes respectively in the Daejang-dong development project, received dividends totaling 404 billion won and 346.3 billion won, amounting to 404 billion won in total. This is 1,154 times the invested capital in dividends. Furthermore, Hwacheon Daeyu is estimated to gain an additional 450 billion won in sales profit by directly developing apartments in the Daejang district.

The reason they could reap such excessive profits was due to the business agreement and shareholder agreement that removed the excess profit recovery clause. The Seongnam Urban Development Corporation excluded such provisions from the private business operator recruitment guidelines. Although the working department at the time suggested that the excess profit recovery clause should be considered, all such opinions were ignored.

The entire plan for the Daejang-dong development project, including the preparation of the recruitment guidelines, was carried out by the Strategic Business Office of the Seongnam Urban Development Corporation, which was directly under former Director Yoo Dong-gyu, the key figure in the current Daejang-dong suspicion.

Lee Sang-ho, the leader of the People Power Party in the city council, said, "It is known that former Director Yoo played a dual role in the city, and former Chairman Choi did so in the city council in establishing the Seongnam Urban Development Corporation," adding, "Since they colluded to lead the establishment of the corporation, we will closely examine the entire process from the beginning."

Meanwhile, the opposition party in the city council proposed the 'Seongnam City Daejang-dong Special Favor Suspicion Administrative Investigation Request Bill' on the 23rd of last month, which is scheduled to be reviewed at the city council plenary session on the 12th.