Repeated Corruption Since Jutogong Era... Structural Problems Created by 'Lenient Punishments'

27 Public Officials Included Among Speculators in 2003 2nd Phase New Towns
Internal Regulations Used to Effectively Overlook Speculation Signs in 2002 and 2006
Experts Call for Strong Punishment and Preventive Measures

[Asia Economy Reporter Ryu Tae-min] "This is not the first time. It frequently happened during the old Korea Land Corporation and Korea Housing Corporation days as well. If structural measures are not taken, it will continue to repeat." (Shim Gyo-eon, Professor of Real Estate at Konkuk University)

Experts agree that the speculation by employees of Korea Land and Housing Corporation (LH) is not a one-time issue but a structural problem that has been recurring since the past. It is not a suddenly emerging problem, as there were numerous cases of employee speculation during the times of Korea Land Corporation (Tokong) and Korea Housing Corporation (Jugong). Tokong and Jugong were public enterprises responsible for land and housing development before merging into LH in 2009. Experts point out that the problem has grown because proper preventive measures were not established and punishment regulations were lax.

Repeated Public Enterprise Employee Speculation with Each New Town Development

According to the industry on the 5th, major speculation allegations involving public officials or public enterprise employees have also occurred frequently in the past. During the second new town development under the Roh Moo-hyun administration in 2003, speculation and corruption by public officials were rampant. As speculation intensified in various new towns, the prosecution set up a joint investigation headquarters in 2005 to crack down on speculation. Among the real estate speculation offenders prosecuted, 27 were public officials, but there was heavy criticism as proper punishment was not carried out.

In July 2006, the ‘Ddakji (apartment pre-sale rights)’ incident involving Tokong employees broke out. Nine Tokong employees bought 47 Ddakji in Paju Gyohashin New Town, designated in August 2003, in bulk. The employees even forged seals during the formation of the association. At the time, Tokong established regulations banning employees from purchasing Ddakji, but the disciplinary actions against the employees were mild, such as pay cuts, reprimands, and warnings, ending with ‘soft’ punishments.

Earlier, in 2002, it was revealed that 18 Tokong employees purchased 90 plots of land in Yongin Jukjeon District for 7 billion won. However, Tokong condoned this by stating, "Since internal employment regulations preventing employees from purchasing Tokong land were abolished after the foreign exchange crisis, there is no problem."

‘Soft’ Punishments Fostered Moral Insensitivity

Experts explain that as cases where punishments were not properly enforced due to structural loopholes accumulated, ‘moral insensitivity’ grew. Seo Jin-hyung, professor at Gyeongin Women’s University and president of the Korea Real Estate Society, said, "In recent years, speculation allegations in public institutions have not surfaced prominently, but structural gaps remain, making them vulnerable to misconduct. Strong punishment regulations are needed, as well as preventive measures to stop speculation by those who have prior access to information and their associates."

In particular, experts agree that there is skepticism about whether a fair investigation will be conducted since the administrative authorities, not investigative agencies like the prosecution or police, are taking the lead in the current LH employee speculation allegations. In fact, in 2002, the prosecution arrested 50 employees from the Ministry of Construction and Transportation, Incheon City, Tokong, and the Free Economic Zone Authority for mass purchases of villas in Yeongjong District, Incheon, involving false address registrations, but there were almost no cases of severe internal disciplinary actions by the ministries or agencies. Shim Gyo-eon, professor of real estate at Konkuk University, said, "If the Ministry of Land, Infrastructure and Transport, which is closely related to LH, leads the full investigation, it could face criticism for ‘protecting their own people.’"

Meanwhile, the Ministry of Land, Infrastructure and Transport plans to establish institutional measures to prevent corruption among employees involved in land development in response to the current LH employee speculation allegations. The ministry stated, "Employees of the Ministry of Land, Infrastructure and Transport, public corporations, and local public enterprises involved in new land development will, in principle, be prohibited from land transactions for purposes other than residence," and added, "We will consider requiring prior reporting in unavoidable situations."

This content was produced with the assistance of AI translation services.