[2021 National Audit] Flood of Questions on Daejang-dong Issue at Policy Banks

Suspicion of Side Contract Raised in Best Man Situation

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] At the National Assembly's Political Affairs Committee hearing held on the 15th, lawmakers' questions focused on the Daejang-dong issue.

Yoon Chang-hyun and Park Soo-young, members of the People Power Party, claimed that the Korea Development Bank (KDB) deliberately submitted a borrowing interest rate significantly higher than its competitors in the Daejang-dong development project, effectively acting as a 'stooge.'

In particular, Rep. Yoon pointed out, "The KDB consortium lost, and the Hana Bank consortium, which included Hwacheon Daeyu, was selected as the project operator, with the orders of Kim Man-bae, Jung Young-hak, and Nam Wook at work, and KDB was played like a piece on a chessboard." Rep. Park also raised suspicions of deliberate stooging by mentioning Article 18 of the bidding guidelines, which excludes construction companies, noting that "two construction companies were included among the KDB consortium participants."

In response, Lee Dong-geol, chairman of KDB, said, "You mentioned unconfirmed matters based on the fact that the KDB consortium was eliminated," adding, "KDB faithfully submitted the business plan according to the bidding guidelines in the Daejang-dong project."

Min Hyung-bae, a member of the Democratic Party of Korea, criticized the KDB consortium's lack of proactiveness in submitting the business report as the reason it was outperformed by the Hana Bank consortium. Rep. Min explained, "Even looking at the compensation plan in the business plan, Hana Bank detailed it over eight pages, whereas KDB only had two pages," adding, "Just the financing conditions in the business plan gave Seongnam Urban Development Corporation no choice but to select Hana Bank."

Rep. Min expressed regret, saying, "If KDB had actively taken charge of the development project, the noisy Hwacheon Daeyu incident would not have occurred, and the Pangyo Daejang-dong development project could have proceeded more in the public interest." He added, "National policy banks need to actively participate in public development to reduce speculative gains and manipulations."

Concerns were raised about the possibility of faulty financial statements of Seongnam's Deul, and questions were asked to Yoon Jong-won, president of IBK Industrial Bank of Korea, confirming that IBK received fees of about 6.3 billion KRW related to its equity stake in Seongnam's Deul.

Rep. Yoon Doo-hyun of the People Power Party pointed out that a significant portion of the fees paid to IBK was omitted in the financial statements of Seongnam's Deul's audit report and asked President Yoon to confirm whether the fees were received. IBK invested 400 million KRW in Seongnam's Deul and holds an 8% stake. In response, President Yoon confirmed, "According to IBK's report, fees of 1.263 billion KRW in 2016, 3.552 billion KRW in 2017, and 1.544 billion KRW in 2018 were received," adding, "It is appropriate that the fee details be included in the reports of both institutions."

Meanwhile, when Rep. Kwon Eun-hee of the People Party questioned the possibility of side agreements among shareholders in the Daejang-dong development project, President Yoon denied, stating, "There were no side agreements."

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