Police Shift to Investigation of 'Daejang-dong Allegations' After 5 Months of Preliminary Inquiry

Lee Jae-myung, the Democratic Party presidential primary candidate, attended the urgent debate on the legislation for recovering development gains titled "How to Recover Development Gains?" held at the Central Veterans Hall in Yeouido, Seoul on the 28th, and delivered a congratulatory speech. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Lee Seon-ae] The police are launching a formal investigation five months after the preliminary inquiry into the suspicious financial flows of Hwacheon Daeyu Asset Management (Hwacheon Daeyu), the real estate development operator of Daejang-dong in Seongnam, Gyeonggi Province. As the prosecution and the Corruption Investigation Office for High-ranking Officials (CIO) have also received complaints regarding the so-called 'Daejang-dong development project preferential treatment' allegations, the police will now examine the 'core' of the case, including suspicions that Gyeonggi Governor Lee Jae-myung gave preferential treatment to Hwacheon Daeyu during his tenure as mayor of Seongnam.

According to the police on the 28th, the National Police Agency’s National Investigation Headquarters assigned two cases reported by the Committee for the Protection of Ordinary Citizens’ Livelihoods (the Committee) to the Gyeonggi Southern Provincial Police Agency for investigation.

The Committee filed complaints with the National Investigation Headquarters the day before, accusing Governor Lee, Seongnam Urban Development Corporation, Hwacheon Daeyu officials, and the son of independent lawmaker Kwak Sang-do of bribery, embezzlement, and other charges.

While preliminary investigations usually transition to formal investigations once some evidence is confirmed, in the case of complaints and accusations, it is standard police procedure to register the case once related documents are received and an investigative department is assigned.

Accordingly, the preferential treatment allegations related to Daejang-dong and the retirement pay case involving lawmaker Kwak’s son have effectively entered the investigation phase.

The case involving allegations of breach of trust and embezzlement against Hwacheon Daeyu’s major shareholder and CEO, which the Yongsan Police Station had been investigating preliminarily after receiving data from the Financial Intelligence Unit (FIU), has also been transferred to the Gyeonggi Southern Provincial Police Agency.

Since April, Yongsan Police Station has been examining financial transactions between Hwacheon Daeyu’s corporation and related parties for five months after receiving FIU data.

Hwacheon Daeyu CEO Lee Seong-moon and major shareholder Kim Man-bae appeared once each as witnesses at Yongsan Police Station to be questioned about the circumstances of borrowing large sums of company funds. Lee Han-seong, CEO of Cheonhwa Dongin No. 1, another subject of the FIU-related investigation, is also coordinating a summons schedule with the police.

Although the police preliminary investigation, initiated by FIU intelligence, has now transitioned to a formal investigation following the receipt of complaints, it is expected to take some time before the police proceed with coercive measures such as account seizures related to the financial flows.

The financial transaction details provided by the FIU are close to 'raw data,' and the volume of materials received by the police is vast, so analysis alone is expected to take considerable time. Since at least minimal evidence must be established before applying for a warrant, the FIU data analysis is likely to continue for the time being.

However, the suspicion regarding the 5 billion KRW retirement pay received by lawmaker Kwak’s son is not a particularly complex case, so the police may expedite searches and seizures targeting the corporation and related parties.

Meanwhile, it has been reported that part of the company funds borrowed by the major shareholder and CEO was used as settlement money for relocating graves within the Daejang-dong real estate development site. Kim testified to this effect during police questioning the day before.

Hwacheon Daeyu also stated in a press release on the same day, "It is true that there were many cases, such as 280 graves and about 100 tenants on the development site, that could not be resolved through land expropriation procedures." They added, "Since Seongnam’s Deul or Hwacheon Daeyu could not directly handle these issues, the CEO or chairman borrowed money from Hwacheon Daeyu and Cheonhwa Dongin to resolve them."

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