Prison Terms for Construction Firm Father and Son Who Hid 11.2 Billion Won Debt in "Villa Construction" Fraud

False Collateral Already Mortgaged Offered as Security
Over 860 Million Won Borrowed and Used for Debt Rollovers

A father and son who recklessly pushed forward with a multi-family housing construction and sales project, racking up debts totaling 11.2 billion won and concealing this fact while borrowing money, have been sentenced to prison terms.

According to Yonhap News on February 1, the 13th Criminal Division of the Incheon District Court (Presiding Judge Kim Gipoom) sentenced Mr. A (67), an inside director at a construction company, to three years in prison and ordered his immediate detention in court for fraud under the Act on the Aggravated Punishment of Specific Economic Crimes. Mr. B (34), A's son who faced the same charges, was sentenced to two years in prison, suspended for three years.

Exterior view of Incheon District Court

Mr. A had worked for years as an inside director at the construction company, while Mr. B was an employee and shareholder at the same company, owning land in Paju and Goyang, Gyeonggi Province. The father and son attempted to develop multi-family housing on these plots and sell the units, but ran into obstacles. The project in Paju faced issues in negotiations with the military, while the project in Goyang failed to obtain a building permit.

Due to the poor business performance, Mr. A’s credit rating fell from level 6 in 2019 to level 8 in 2021, just two years later. By 2022, their accumulated debt had ballooned to 11.2 billion won. Far from repaying the principal, Mr. A even resorted to loan sharks, with monthly interest payments alone reaching 50 million won. The father and son concealed these circumstances and borrowed money from Mr. C, an acquaintance introduced through a friend, using the funds to pay off existing debts.

They deceived Mr. C by claiming, "We will provide a mortgage on the Paju land," and promised, "We will repay the principal in six months and also pay 3% monthly interest." They also assured that if they failed to repay, they would give Mr. C one unit of the completed multi-family housing. However, at that time, the land already had a large senior mortgage, rendering it worthless as collateral. Unaware of this, Mr. C lent them over 860 million won in four installments between December 2020 and August 2021.

Even after the multi-family housing in Paju was completed, the father and son failed to repay any of the borrowed money. Ultimately, the building was auctioned off due to financial difficulties. The two were later brought to trial. During the proceedings, the father and son argued, "We intended to repay the borrowed money with the sales proceeds, but the business failed due to external circumstances. There was no intent to defraud."

However, the court stated, "The defendants were overly optimistic about the project's success and failed to prepare for the risk of being unable to repay their debts, instead engaging in a Ponzi-like borrowing scheme. As a result, the risk materialized and the victim was not repaid at all." The court further explained the sentencing, saying, "The victim appears to have suffered significant financial distress as a result of the crime, and no settlement was reached. However, we also considered that the borrowed funds were used for the business and that there does not appear to have been definite intent to defraud."