Escalating Lee Jae-myung's 'Daejang-dong Allegations'... What Are the Key Issues?

① Allegations of Preferential Treatment in Company Selection
② Whether Governor Lee Is the Real Owner of Hwacheon Daeyu and Has a Special Relationship
③ Massive Dividends and Appropriateness of Business Structure

[Asia Economy Reporter Koo Chae-eun] Allegations related to the Pangyo Daejang District project during Lee Jae-myung’s tenure as mayor of Seongnam are intensifying. The core issues in this matter are whether ① there were any special favors or corruption in the process where ‘Hwacheon Daeyu,’ a private investor in the project, earned enormous profits, ② whether the actual owner of Hwacheon Daeyu has a special relationship with Governor Lee, and ③ whether the business structure, which involved an investment of 50 million KRW yielding dividends of 57.7 billion KRW, was appropriate.

The Daejang-dong urban development project involved developing 5,903 households on approximately 910,000 square meters of land in Daejang-dong, Seongnam, with an investment of 1.15 trillion KRW. The project was executed by the special purpose company (SPC) ‘Seongnam’s Garden,’ and Hwacheon Daeyu, whose actual owner is Mr. A, a former journalist, participated as a private investor. Governor Lee switched the project, which had been promoted as a private development, to a public development after taking office and began related work in 2015.

① Were there special favors? = Opposition parties have raised the possibility of special favors in the selection process of Hwacheon Daeyu as a project participant. It is suspicious that the large-scale project plan, with land acquisition costs exceeding 1 trillion KRW, was announced on March 30, just four days after the application deadline (March 26, 2015), and the evaluation was completed in only three days. It is also questionable that a newly established company, only five months old, participated and was selected as a bidding company for a large-scale development project. However, Governor Lee drew a line on these allegations at a press conference the day before, stating, “The company was selected through a legal public bidding process, and the profit distribution structure was decided at the consortium level.”

② Is a close aide of Governor Lee the actual owner? = There are also suspicions about a special relationship between Mr. A, the former journalist who owns Hwacheon Daeyu, and Governor Lee. It is a key issue to clarify whether the profits earned by Hwacheon Daeyu flow to Governor Lee or his close aides, similar to the cases of former President Lee Myung-bak’s DAS or BBK. However, the only confirmed fact so far is that Mr. A interviewed Governor Lee in July 2014. Governor Lee stated the day before, “I have never met him since that interview.”

③ Was the profit-making process legitimate? = The fact that Hwacheon Daeyu invested 50 million KRW and received dividends of 57.7 billion KRW over three years, earning more than 1,000 times the investment, is controversial. Although the intention was to recover land development profits for the public and distribute benefits to Seongnam citizens, private companies earned enormous profits in the process, which contradicts Governor Lee’s stance against unearned real estate income.

On this day, Kang Min-guk, floor spokesperson for the People Power Party, commented, “It is unacceptable for a few private businesses to earn huge development profits from prime land development without any special favors or secret deals.” Chief spokesperson Heo Eun-ah also criticized, “The Daejang-dong development project is a real estate favoritism scandal that has touched the public’s nerve, and it is a major case that may involve a sitting governor who is leading the ruling party’s approval ratings.”

However, in response to these criticisms, Governor Lee retorted, “Even now, many central and local governments grant private development permits, so should we criticize the large profits private investors make there? Instead, the part where we converted private development to public development and recovered some of the profits should be praised.”

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