Excess Profit Recovery Excluded: "Confession of Breach of Trust" vs "Not Reported, Hence Not Adopted"... Clash at 'Daejang-dong Audit' (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Koo Chae-eun] At the National Assembly Land, Infrastructure and Transport Committee's audit held on the 20th, dubbed the 'Daejang-dong Round 2,' the opposition party and Lee Jae-myung, the Democratic Party presidential candidate, clashed head-on over whether the 'excess profit recovery clause exclusion' could constitute breach of trust. The opposition launched a fierce attack, calling it a 'confession of de facto breach of trust and dismissal of excess profit claims.'

During the Gyeonggi Province audit by the National Assembly Land, Infrastructure and Transport Committee that day, Justice Party lawmaker Shim Sang-jung questioned, "You proposed to include the excess profit recovery clause but removed it. Was there no controversy at all? Are you saying that is not true?" In response, candidate Lee said, "It is common sense that such a thing has never been heard of."

Candidate Lee explained, "Whether excess profits should be recovered, that is, whether to secure profits by ratio or by fixed profit, is like banks using variable interest rates during periods of rising rates and fixed rates during falling rates," adding, "It is natural for the private sector to want the opposite, but since this is not a unilateral administrative disposition but a contract negotiated, discussions must be within a range acceptable to the other party."

People Power Party lawmaker Kim Eun-hye also pointed out to candidate Lee, "You said during the last audit that you did not accept the proposal for the excess profit (recovery) clause," to which Lee rebutted, "I did not say that."

[Image source=Yonhap News]

When lawmaker Kim asked, "You changed the subject within a day," candidate Lee replied, "I did not change anything," and explained, "After seeing media reports claiming the excess profit recovery clause was deleted, I looked closely and found it was not deleted but that a frontline employee did so during the agreement process after the bidding and contest ended."

He emphasized, "The fact is that it was not adopted at the executive level at the time."

After the exchange with lawmaker Kim, candidate Lee posted on Facebook during the audit recess a post titled 'Fact Check... Request for Correction of Media Reports,' demanding, "Please report it as 'excess profit recovery opinion not adopted' rather than 'excess profit recovery clause deleted,' and correct previous reports accordingly."

As the reason for non-adoption, he said, "To prevent private sector cost inflation, accounting manipulation, and lobbying, Seongnam City's policy was to pre-determine its share," adding, "The contest proceeded according to this policy, and during detailed negotiations with the Hana Bank consortium, there was a practical opinion to additionally recover excess profits when the real estate market improved, but the corporation did not adopt it during the approval process."

[Image source=Yonhap News]

Candidate Lee repeatedly emphasized the analogy of fixed and variable interest rates regarding the non-adoption of the excess profit recovery clause. He said that excess profit recovery and fixed confirmed profits were conflicting demands and could not be done together. He mentioned, "For example, banks use variable rates if they expect rates to rise and fixed rates if they expect rates to fall. At that time, our prediction was that the real estate market would likely worsen, so we secured fixed profits."

He stressed, "Seongnam City's firm policy at the time was to prevent cost-inflating accounting manipulation and public official lobbying," and "At that time, it was uncertain whether development profits would rise or fall."

Candidate Lee explained, "If profits rise more than predicted due to a real estate market upswing, it would be common sense to share the burden (risk), and conversely, if profits fall below predictions, the burden should also be shared." Conversely, he added, "If fixed profits were guaranteed and even when land prices rose, the profits were attributed to Seongnam City, then (cases like Hwacheon Daeyu) could constitute breach of trust by private companies."

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