"LH Speculation Scandal 'Devastating' Hong Nam-ki Bowed His Head... Market Says 'Like Entrusting Fish to a Cat'"

Published 07 Mar.2021 12:24(KST)

Despite Controversy Over Undermining Trust in Government Policy, Commitment to Proceed with Previously Announced Supply Plan Expressed
"While External Experts Were Asked to Sign Integrity Pledges... Speculation Corruption Lies Within"
Minister of Land, Infrastructure and Transport Byeon Chang-heum Only Attended Reading of Announcement

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, bowed his head and expressed his "apologies" over the land speculation allegations involving employees of Korea Land and Housing Corporation (LH). While Hong delivered a public appeal for about 15 minutes, Byeon Chang-heum, former LH president and current Minister of Land, Infrastructure and Transport, the relevant ministry head, remained silent. In the market, there are calls that rather than a formal apology, thorough verification of facts, recovery of illicit gains, and punishment must be pursued to restore the lost trust in real estate policies.

On the morning of the 7th, Hong Nam-ki announced "A Message to the People" at the Gwanghwamun Government Seoul Office, saying, "It is heartbreaking that an unfortunate incident occurred in a public institution that should be the most fair and strict with itself," and added, "As the minister responsible for the economy and comprehensive management of public institutions, I sincerely apologize to the people."

At the event, Hong emphasized that if it is confirmed that LH employees used insider information for speculation, they will face no-tolerance measures such as referral for investigation and disciplinary action. As part of strengthening internal controls, he pledged to establish a fundamental system to prevent recurrence, including introducing a real estate registration system for employees and other monitoring mechanisms. He said, "We will block personal motives for misconduct at the source and consider strengthening the management responsibility of institutions for serious violations," and stressed, "Illegally obtained profits will be fully recovered, and if speculation related to the 3rd phase new towns is confirmed, investigations will also cover sources of funds, tax evasion, and compliance with loan regulations."

Concerned that the LH employee speculation scandal could shake trust in government-led urban development and supply policies, he reiterated his intention to "significantly strengthen the execution of real estate policies." He expressed strong determination by mentioning monthly implementation schedules. He explained, "Housing supply plans, including the 2.4 supply plan to provide 830,000 units, will be carried out on schedule," and added, "In March, we plan to disclose selected candidate sites for the 2.4 supply plan in consultation with the private sector and local governments, as well as the second public redevelopment candidate sites under the August 4th plan." He continued, "In April, we will announce the locations for the second new public housing sites, recruit tenants for public rental housing in June, and start pre-subscription for the 3rd phase new towns in July," and added, "We will meticulously check and manage all these processes until confidence in expanding housing supply is firmly established."

During the reading of the statement, Minister Byeon and Koo Yoon-chul, Director of the Office for Government Policy Coordination, sat beside Deputy Prime Minister Hong but did not make any separate announcements or participate in Q&A. In particular, Minister Byeon, the former LH president and current head of the relevant ministry, listened with a stern expression throughout. This appears to reflect public concerns over a 'self-investigation,' where the investigation subject and the person responsible for the investigation are the same. The timing of the land purchases by the employees under suspicion overlaps with Minister Byeon's tenure as LH president, raising accountability issues and doubts about whether a proper investigation can be conducted.

Experts view the fact that the 'speculators,' whom the government had identified as the main culprits behind the rapid rise in real estate prices, were actually inside the organization as a fatal blow to policy credibility. Professor Kwon Dae-jung of Myongji University’s Department of Real Estate emphasized, "A thorough investigation must be conducted to verify the facts and ensure that no innocent victims suffer during the new town development process," and added, "Especially, trust accounts under third-party names must be recovered and punished severely." He predicted, "Although the government’s policy has suffered a critical wound, the 3rd phase new town project will proceed as planned to restore trust."

Another industry insider criticized, "When attending review and discussion meetings related to government land development, external experts always sign integrity pledges mentioning civil and criminal liabilities," and added, "The government failed to root out internal corruption and effectively entrusted the cat with the fish," criticizing the situation.