[Daechang-dong Development Allegations] The Path of Money Flow... The Key to Uncovering Lobbying and Collusion

Hwacheon Daeyu and Cheonhwa Dongin Major Shareholders Divided Over Profit Distribution
Hwacheon Daeyu Gives 500 Million KRW Bribe to Yoo Dong-gyu, Who Designed Overall Development
Proving and Punishing Bribery of Development Profits Expected to Be Difficult

[Asia Economy Reporter Jang Hyowon] As the investigation into the Daejang-dong development project in Seongnam City, Gyeonggi Province, gains momentum, attention is focusing on the flow of development profits earned by major shareholders such as Hwacheon Daeyu and Cheonhwa Dongin 1~7. As the shareholders, who initially started as an economic community, show signs of division over ‘profit distribution,’ the large cash flow is expected to become a key clue in revealing the bribery circumstances involving Hwacheon Daeyu and Cheonhwa Dongin, as well as the possible collusion between Seongnam Urban Development Corporation and Hwacheon Daeyu.

The prosecution is identifying the time when accountant Jeong Young-hak began making recordings as 2019, when apartment sales profits started to be distributed in earnest.

Hwacheon Daeyu and Cheonhwa Dongin Took 404 Billion KRW

In July 2015, ‘Seongnam’s Garden’ PFV (Project Finance Vehicle) was established for the Daejang-dong development project in Seongnam City. This company consisted of 69,999 common shares and 930,100 preferred shares. Preferred shares are stocks that grant the right to receive dividends preferentially from the company’s profits. The par value per share was 5,000 KRW, making the total capital 5 billion KRW.

Seongnam Urban Development Corporation held 501,000 preferred shares, while Hana Bank and other financial institutions held the remaining preferred shares. Hwacheon Daeyu held 9,999 common shares, and Cheonhwa Dongin 1~7 held 60,000 common shares through a specific money trust of SK Securities. In terms of total shares, Hwacheon Daeyu owned 1%, and Cheonhwa Dongin 1~7 owned 5%. In terms of capital, Hwacheon Daeyu invested 50 million KRW, and Cheonhwa Dongin 1~7 invested 300 million KRW.

Since its establishment, Seongnam’s Garden recorded cumulative sales of about 2 trillion KRW until last year. The cumulative net profit reached 600 billion KRW. Of this, Hwacheon Daeyu and Cheonhwa Dongin 1~7 received 404.1 billion KRW as dividends.

According to the audit report, over the past three years, Hwacheon Daeyu received 57.7 billion KRW in dividends from Seongnam’s Garden. Cheonhwa Dongin 1, a 100% subsidiary of Hwacheon Daeyu, received 120.8 billion KRW. Cheonhwa Dongin 2 and 3 each received 10.1 billion KRW, 4 received 100.7 billion KRW, 5 received 64.4 billion KRW, 6 received 28.2 billion KRW, and 7 received 12.1 billion KRW. In particular, Hwacheon Daeyu directly implemented projects in five Daejang-dong districts, securing an additional 235.2 billion KRW from sales profits.

Hwacheon Daeyu and Cheonhwa Dongin are corporations owned by the ‘economic community’ of the Daejang-dong development project. Hwacheon Daeyu’s largest shareholder is Kim Man-bae, a former journalist who owns 100% of the shares. Cheonhwa Dongin 1~3 are led by Kim’s family members as CEOs. Kim graduated from Sungkyunkwan University and is known as a well-connected figure in the legal community.

The CEO of Cheonhwa Dongin 4 is lawyer Nam Wook. Nam was arrested and indicted on charges of bribing politicians to change the Daejang-dong project from public to private development in 2015 but was later acquitted. Cheonhwa Dongin 5 is the corporation of accountant Jeong Young-hak, known as the architect of the Daejang-dong profit distribution. Cheonhwa Dongin 6 is led by lawyer Jo Hyun-sung, a junior to lawyer Nam, and Cheonhwa Dongin 7 is reportedly owned by Bae Mo, a junior journalist to Kim Man-bae.

Unclear Lump Sum Expenditures Are the Key

Hwacheon Daeyu and Cheonhwa Dongin used the funds they secured for legal advisory fees, employee severance pay, and real estate purchases.

Hwacheon Daeyu paid former Supreme Court Justice Kwon Soon-il and former special prosecutor Park Young-soo 15 million KRW per month as advisory fees. Former Prosecutor General Kim Soo-nam, former Suwon District Prosecutor General Kang Chan-woo, and former Choi Soon-sil’s lawyer Lee Kyung-jae also received several million KRW monthly for advisory and consulting fees. Additionally, Hwacheon Daeyu paid 5 billion KRW to the son of former People Power Party lawmaker Kwak Sang-do as bonuses and severance pay.

Hwacheon Daeyu also reportedly gave 500 million KRW in bribes to Yoo Dong-gyu, former acting president of Seongnam Urban Development Corporation, who is known to have designed the overall Daejang-dong development. Yoo was arrested on related charges on the 3rd. Furthermore, Hwacheon Daeyu’s major shareholder Kim lent 10 billion KRW to Lee Mo, CEO of A Sales Agency and a relative of former special prosecutor Park Young-soo, raising questions about the nature of the funds.

Cheonhwa Dongin 1 purchased a townhouse in Unjung-dong, Bundang-gu, Seongnam City, for 6.2 billion KRW. This townhouse is located in one of the country’s most luxurious residential complexes, known as the ‘Beverly Hills of Pangyo.’ Cheonhwa Dongin 3 bought the former residence of former Prosecutor General Yoon Seok-youl’s father for 1.9 billion KRW. They also purchased a building in Jungnang-gu for 9 billion KRW and a detached house in Yangcheon-gu for 900 million KRW.

Cheonhwa Dongin 4 and 5 each purchased buildings in Gangnam-gu worth 30 billion KRW and 17.3 billion KRW, respectively. They also gave 6 billion KRW each, totaling 12 billion KRW, to Jeong Jae-chang, a major shareholder of Wirye Asset Management. Jeong is known to have been a business partner with lawyer Nam and accountant Jeong during the development of Wirye New Town and reportedly demanded money after detecting their bribery to former acting president Yoo. Cheonhwa Dongin 7 purchased a Starbucks building in Gijang-gun, Busan, for 7.4 billion KRW.

However, the general consensus is that proving and punishing whether the nature of the Daejang-dong development profits that flowed in this way constitutes bribery is not easy. While bribes can be confiscated and embezzlement or breach of trust can be reclaimed by Seongnam City through civil lawsuits, it is difficult to specify the scale, and fierce legal battles are expected.

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