Prosecutors Launch Investigation into Daejang-dong Allegations... Police Notify Hwacheon Daeyu Owner to Appear

Lee Jae-myung, Governor of Gyeonggi Province. Photo by National Assembly Press Corps

[Asia Economy reporters Choi Seok-jin, legal affairs specialist, and Jeong Dong-hoon] As the prosecution has begun a full-scale investigation into the preferential treatment allegations related to the Daejang-dong development project, the police, who are conducting a preliminary investigation, have started preparing to switch to a formal investigation system by notifying the key figures involved in the allegations to appear.

With the opposition party’s planned accusation of Gyeonggi Province Governor Lee Jae-myung on charges of breach of trust, a two-track investigation by the prosecution and police into the Daejang-dong allegations is expected to begin soon.

According to the police on the 24th, the Yongsan Police Station in Seoul, which is conducting a preliminary investigation into embezzlement and breach of trust allegations surrounding Hwacheon Daeyu, is coordinating the schedule to summon Kim, the major shareholder of Hwacheon Daeyu, for a witness investigation. Earlier, the police had summoned and questioned Lee Sung-moon, the CEO of Hwacheon Daeyu, once.

The police appear to be preparing for a formal investigation by adding one team (five members) from the Financial Crime Investigation Unit’s Crime Proceeds Tracking Investigation Team of the Seoul Metropolitan Police Agency the day before.

However, a Yongsan Police Station official drew a clear line regarding the investigation into the preferential treatment allegations involving Governor Lee and others, which the opposition party claims, stating, “The embezzlement and breach of trust case involving the major shareholder of Hwacheon Daeyu and the preferential treatment allegations are separate,” and “We are not considering expanding the investigation.”

The day before, the Seoul Central District Prosecutors’ Office assigned the case in which Governor Lee’s camp filed a complaint against People Power Party floor leader Kim Ki-hyun, lawmaker Yoon Chang-hyun, and candidate Jang Ki-pyo?who raised suspicions of Governor Lee’s involvement?for violations of the Public Official Election Act and defamation under the Information and Communications Network Act, to the Public Investigation Division 2, a unit specializing in election crimes, and commenced an investigation.

The direct subject of this complaint investigation is whether false information was spread with the intent to defeat Governor Lee or whether false information was stated to defame Governor Lee. However, to conclude whether these crimes are established, the truthfulness of the People Power Party’s claims must be judged first, making it inevitable to examine the overall Daejang-dong allegations.

Moreover, if the People Power Party soon files a complaint with the prosecution accusing Governor Lee of breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes, it is highly likely that the prosecution will also conduct an investigation into the main aspects of the case, such as the flow of funds related to Hwacheon Daeyu, which the police are currently investigating preliminarily.

In the legal community, it is anticipated that the opposition party will accuse former Gyeonggi Tourism Organization President Yoo Dong-gyu, who served as the acting president and head of the planning division at Seongnam Urban Development Corporation in 2014 when the Daejang-dong development project was actively promoted, and Governor Lee as co-conspirators in breach of trust.

For breach of trust charges to be established against Governor Lee and others, it is not enough that Hwacheon Daeyu or its subsidiaries earned unusually large profits; it must be revealed that Governor Lee and others intervened in the selection process of the business operator to benefit a specific private company and caused damage to Seongnam City.

Experts point to suspicious circumstances suggesting breach of trust, such as the fact that the evaluation for selecting a large-scale business operator worth about 1.5 trillion won was completed in just one day, the attendance of internal employees (internal members) of the corporation instead of external evaluators at the selection evaluation for the preferred negotiation partner, and the abnormal profit distribution structure of the special purpose company (SPC) ‘Seongnam’s Garden,’ with 93% preferred shares and 7% common shares.

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