Prosecutors Conduct Search and Seizure on Hwacheon Daeyu Executives over 'Kim Man-bae's Fund Concealment'

Search of homes of 4 executives including Executive Director Yang Mo
Kim Man-bae contracts to pay 28 billion KRW in bonuses to 13 employees

[Asia Economy Reporter Han Yeju] The prosecution has detected additional allegations of concealment of criminal proceeds by Kim Man-bae, the major shareholder of Hwacheon Daeyu Asset Management, and has launched a forced investigation.

The Anti-Corruption Investigation Division 1 of the Seoul Central District Prosecutors' Office (Chief Prosecutor Eom Hee-jun) sent prosecutors and investigators to the residences of four executives, including Yang Mo, former Executive Director of Hwacheon Daeyu, to search for evidence related to criminal proceeds.

The prosecution believes that Kim disguised illegal profits as performance bonuses and embezzled about 7 billion KRW to these individuals. Hwacheon Daeyu executives and employees are also suspected of participating in concealing Kim’s Daejang-dong profits.

According to the performance bonus payment plan attached to the Hwacheon Daeyu board meeting minutes dated June 25, 2020, the company decided to pay a total of 28 billion KRW in performance bonuses to 13 executives and employees, including CEO Lee Seong-moon and former Executive Director Yang. Initially, the plan from 2015 to 2017 was to pay a total of 9.016 billion KRW to six people, but as of June 29, 2020, the number of bonus recipients increased by seven, and the total amount more than tripled.

CEO Lee Seong-moon’s bonus was significantly increased from 3 billion KRW to 12 billion KRW, former Executive Director Yang from 3.5 billion KRW to 5 billion KRW, Executive Director Shim from 700 million KRW to 1.5 billion KRW, and Executive Director Ryu from 216 million KRW to 500 million KRW. CEO Lee Seong-moon was also previously subjected to a prosecution raid.

Major shareholder Kim Man-bae of Hwacheon Daeyu Asset Management, the private developer of the Daejang-dong development project.
[Photo by Yonhap News]

The prosecution suspects that this increase in performance bonuses is related to Kim’s concealment of criminal proceeds.

According to the so-called 'Jung Young-hak recording' revealed during Kim’s breach of trust trial, in October 2020 at a karaoke room in Suwon, Gyeonggi Province, Kim told former Seongnam Urban Development Corporation Director Yoo Dong-gyu, "There are many employees who know the secret. Then how do you stop them? You have to stop them with money," and said, "So the CEO (Lee Seong-moon) gets 12 billion KRW, former Executive Director Yang 5 billion KRW, and the executive directors 1.5 billion KRW each, totaling about 28 billion KRW."

The prosecution has registered as suspects only those Hwacheon Daeyu executives and employees who received performance bonuses and were aware that the Daejang-dong profits were illegally generated. The number of participants in concealing criminal proceeds may increase depending on the investigation.

After analyzing the evidence and account details secured on this day, the prosecution plans to summon the parties involved to confirm whether they promised to return the increased performance bonus amounts to Kim later.