[The Editors' Verdict] Incompetent Administration and Unintended Benefits

Daejang-dong Project Agreement Lacks 'Excess Profit Recovery'
Hwaseong Theme Park Agreement Violates Public Offering Guidelines
Followed 'Hypocritical' Orders but Betrayed Public Interest

The basis for Hwacheon Daeyu, the main player in the Daejang-dong incident, to take away thousands of billions of won in development profits lies in the business agreement signed with Seongnam Urban Development Corporation. This document limited Seongnam Urban Development Corporation's profits to 182.2 billion won and omitted the so-called 'private excess profit recovery' clause, which would have allowed the private developer to take all excess profits. Initially, an employee of Seongnam Urban Development Corporation drafted an internal review opinion stating that a separate clause was necessary to recover private profits in the business agreement draft prepared by Hwacheon Daeyu, but this content was deleted within seven hours.

A similar scene appears in the process where Korea Water Resources Corporation (K-water) violated the public offering guidelines and sold the Hwaseong International Theme Park project land to Shinsegae at a low price. According to the audit report disclosed by the Board of Audit and Inspection, a K-water employee wrote an internal review document before signing the business agreement with Shinsegae, pointing out the 'problem that the effect of easing building restrictions is not reflected in the land sale price appraisal.' The public offering guidelines for this project stipulated that the sale price should be determined based on an appraisal reflecting development profits such as the easing of building restrictions, and the employee pointed out that the business agreement brought by Shinsegae violated these guidelines. However, this phrase was also deleted after six days. This was due to a superior who received the review document stating that "the effect of easing building restrictions should not be reflected in the appraisal."

As a result, K-water transferred the project land to Shinsegae at an undervalued price. There is also testimony from an appraiser that if the appraisal had been conducted according to the public offering guidelines, the sale price would have been about twice as high. Although K-water clearly suffered financial losses, agreeing to a business agreement favorable to Shinsegae is far beyond common sense.

As K-water explained, the Hwaseong International Theme Park development project has been stalled for over 10 years, and K-water employees may have used irregularities to expedite the project. This project, which develops reclaimed land around Songsan-myeon, Hwaseong-si, Gyeonggi-do, began in 2007 but faced the risk of collapse as the developer gave up twice. During the Ministry of Strategy and Finance's re-promotion of the project in 2019, an employee responsible for interdepartmental coordination was selected as an 'Outstanding Public Official for Active Administration,' reflecting the Moon Jae-in administration's strong will to push the project forward. The large attendance at the 2019 Hwaseong International Theme Park vision declaration ceremony by key figures such as Shinsegae Vice Chairman Chung Yong-jin, Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki, Gyeonggi Province Governor Lee Jae-myung, Hwaseong Mayor Seo Cheol-mo, and K-water President Lee Hak-soo further proves this.

Despite the government's strong will to promote the project, K-water cannot be exonerated for violating the public offering guidelines and selling the project land at a low price. The core issue in the ongoing legal battle over the Daejang-dong breach of trust case is that Seongnam Urban Development Corporation omitted the private excess profit recovery clause from the business agreement. The Seongnam Urban Development Corporation employee responsible for the Daejang-dong business agreement took their own life during the prosecution investigation.

Through investigations by the Board of Audit and Inspection and others, Shinsegae has yet to break ground on the project. Since permits such as tourist complex designation have not yet been granted, it is difficult to calculate the exact amount of K-water's loss due to the easing of building restrictions. The scale of profits Shinsegae will gain is also unclear due to the downturn in the construction market. However, unfair business agreements have appeared in every development corruption case, infringing on fair competition and public interest. This is why the audit report on the Hwaseong International Theme Park by the Board of Audit and Inspection was noteworthy.