[Exclusive] After 5.8 Billion Won Was Scrapped, Now 3.8 Billion... Onepentas Association President Pushes for Performance Bonus Again

Performance Bonus Proposal Reintroduced One Year After Withdrawal
Extraordinary General Meeting Agenda to Be Submitted Later This Month
Some Members Prepare for Legal Action
Association Lawsuits Delegated to President's Affiliated Law Firm

The Raemian Onepentas (Sinbanpo 15th Complex) reconstruction association is once again embroiled in internal conflict over the association president's performance bonus. After withdrawing a proposal last year to pay a 5.8 billion won performance bonus, the association has now lowered the amount to 3.8 billion won and is trying to persuade its members. Some opposing members have raised legal challenges, citing violations of the law and breach of trust by the association president.

According to the maintenance industry on September 9, the Sinbanpo 15th Complex association will put the agenda item of paying a performance bonus to the association president up for discussion at the board of delegates meeting scheduled for September 11. If the agenda passes, it will be presented at the extraordinary general meeting scheduled for September 26.

A panoramic view of the Raemian Onepentas complex, rebuilt from Sinbanpo 15th.

Performance Bonus for Onepentas Association President Resubmitted: 5.8 Billion Won to 3.8 Billion Won

The association cited several reasons for proposing the performance bonus to the president: resolving internal strife and confusion after taking office; terminating the contract with Daewoo Engineering & Construction and selecting Samsung C&T as the new contractor; ensuring uninterrupted project progress; setting the highest general sales price at the time of sale (67.36 million won per 3.3 square meters); refusing Samsung C&T's request for increased construction costs and completing construction at 6.34 million won per 3.3 square meters; distributing a total of 142 billion won in refunds to members; leading the settlement agreement with Bali, which enabled early public notice and registration of ownership. The association stated, "By generating a massive profit of 580 billion won, we distributed the largest project profits in history to our members, and we intend to pay the association president a performance bonus of 3.8 billion won (1.9 billion won after tax) for his contribution to the project's success."

Members expect the proposal to pass in the board of delegates meeting, which tends to reflect the association's intentions. However, they anticipate a different outcome at the extraordinary general meeting. One Sinbanpo 15th Complex member pointed out, "There is still no accounting basis, just like last year. Last year, the president estimated his contribution at 580 billion won and demanded 1% or 5.8 billion won. This year, there is insufficient explanation for why the amount is set at 3.8 billion won. Lawsuits for damages against Daewoo Engineering & Construction and other unsettled project costs remain unresolved, so it is hard to understand the push for a performance bonus." Regarding this, the association president commented, "This matter has not yet been decided by the board of delegates. I cannot give an interview about an ongoing issue."

Last year, a similar attempt to pay a performance bonus to the president was scrapped due to opposition from members. At the extraordinary general meeting held in July last year, the proposal to pay a 5.8 billion won bonus passed with a majority vote. However, some members filed for an injunction, arguing that the proposal required approval by at least two-thirds of the members. Subsequently, President Kim expressed his intention not to receive the bonus, and the members withdrew the injunction request.

The Seoul Metropolitan Government prohibits paying association executives any compensation other than salary and bonuses. However, this regulation does not have legal force. As a result, the issue of performance bonuses for association presidents has become controversial at various redevelopment sites. The Acro River Park reconstruction association once passed a proposal to pay 20% of the project's 100 billion won profit as a performance bonus, but the Supreme Court ruled it invalid. On remand, the High Court recognized only 7% of the additional profit as a valid performance bonus.

Controversy Over 'Self-Contracting' by Association President ... Members File Lawsuits Against President 

Last year, when the association president requested a performance bonus, he explained to members that "during seven years as president, I suspended my legal practice and my household was always in deficit." The president took office in May 2017 and received permission for concurrent positions from the Seoul Bar Association until 2023, but is still concurrently practicing law.

One member claimed, "There is a law firm handling major cases such as the damages lawsuit against Daewoo Engineering & Construction, and it appears the association president inserted the firm he belongs to. While working as a lawyer at that firm, he told members he had suspended his legal practice. If no one had raised the issue, he would have continued to take on cases."

In response, at the end of July, the association president decided at a board meeting not to sign a retainer agreement for the appeal case regarding land delivery against Daewoo Engineering & Construction, despite receiving board approval. For other ongoing cases in the early stages that he is currently handling, he decided to terminate the retainer agreements. He also pledged not to enter into any such agreements in the future.

According to the board meeting minutes, the president stated, "I looked into relevant regulations and precedents and even called other lawyers to ask whether the retainer agreement with Law Firm Asia constitutes self-contracting, but I could not reach a clear conclusion. From a broad and critical perspective, it could be argued that this is a self-contract."

In March, members filed criminal complaints against the president for violations of the Urban and Residential Environment Improvement Act and breach of trust. They claimed that, despite the lawsuit value for the Daewoo Engineering & Construction bid deposit case being 10 billion won, the contract with Law Firm B stipulated a 50 million won retainer and a 3 billion won success fee for a full victory, which they argue constitutes a breach of trust. Additionally, they pointed out that direct contracts for 700 million won worth of exercise equipment, 200 million won worth of artworks, and 200 million won worth of landscaping work violated the Urban and Residential Environment Improvement Act. For contracts other than goods, manufacturing, purchasing, and services, direct contracts are only permitted if the estimated value is less than 50 million won.

Kim Yerim, an attorney at Law Firm Simmok, explained, "If the association president entrusted a case to a law firm he belongs to, it could be a violation of the Attorney-at-Law Act. Success fees are usually set at around 5%, so 3 billion won is excessive. It is also difficult to understand, by convention, why multiple law firms were retained for the same matter, and if documents were not submitted, this could be problematic."