"Inflated Construction Costs"... Incheon Urban Corporation Files Complaints Against Songdo Hotel Operator and Contractor

Incheon City: "Same Person for Operator and Contractor, 55 Billion Won Construction Contract Fraud"
Operator Side: "Construction Cost Proven by Court Appraisal, Will Sue iH for Defamation"

There is controversy as the operator and contractor of Songdo Central Park Hotel in Songdo International City, Incheon, are suspected of inflating construction costs to receive hundreds of billions of won from Incheon Urban Corporation (iH).

According to Incheon City on the 21st, iH, a public enterprise under the city, recently filed a police complaint against the CEO of company A, the operator of Songdo Central Park Hotel, and the CEO of company B, the contractor, on charges of fraud and breach of trust. In the complaint, iH claimed, "Company A made a false construction contract worth 55 billion won with company B, the contractor, in 2013 for the residence hotel, and exercised a lien to receive construction payments from iH."

The hotel construction project began when iH held a private business proposal contest in 2012 to solve the accommodation shortage for the 2014 Incheon Asian Games. However, due to the suspension of construction in 2014 and the contractor's exercise of a lien, the owner iH was unable to exercise property rights and faced a situation where it had to bear part of the construction costs and interest.

In July, the court ruled that iH must pay 40.9 billion won in construction payments and 27.2 billion won in interest due to construction delays, totaling 45.9 billion won. In response, iH filed an objection to the court's compulsory mediation based on the board's judgment that the construction costs were excessively calculated, and the city audit office also ordered a re-examination of the construction costs through a special audit.

Songdo Central Park Hotel. Provided by Incheon Urban Corporation

Hwang Hyo-jin, Deputy Mayor for Global City Administration of Incheon City, held a press conference regarding Songdo Central Park Hotel on the same day and explained, "Companies A and B are effectively the same entity and made a false contract," adding, "No construction statements or accounting documents related to the 55 billion won contract have ever been presented."

He further stated, "The actual construction work carried out by company A was only 4.2 billion won approved by iH in 2014," and "According to company A's 2017 audit report, the unpaid contract construction cost was 10.7 billion won, which is significantly different from the contract amount, leading to the judgment that the contract was false."

In response, the CEO of company A rebutted, "Both the appraisal by the company designated by iH in 2015 and the recent court appraisal showed a valuation of over 40 billion won (in construction costs)," and "It has been objectively proven that more than 40 billion won was actually invested in the total construction costs."

He added, "We will clearly state that there are no charges in the police investigation and will sue iH officials for false accusation," expressing a strong stance.