Controversy Over Collusion and Proxy Candidates in Yeonggwang Saemaeul Geumgo Chairman Election Widens

Election notice poster for the chairman of Yeonggwang Saemaeul Geumgo. Photo by Jinseok Shim

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Yeonggwang Saemaeul Geumgo in Jeonnam is facing unexpected controversy over 'proxy candidates through collusion among election candidates' ahead of the chairman election scheduled for March 5.

The controversy arose after a candidate, who was expected to compete with the incumbent chairman, failed to register due to an unfortunate incident, leading to suspicions that another candidate was set up to run in his place.

There are concerns that the first-ever simultaneous chairman election in the history of Saemaeul Geumgo is causing division within the local community, going beyond mere election fever.

According to the Jeonnam Provincial Election Commission and others on the 26th, the registration for candidates for the 1st nationwide simultaneous Saemaeul Geumgo chairman election, to be held on March 5, was completed last week (by the 19th). For Yeonggwang Saemaeul Geumgo, the final candidates are the incumbent chairman Park Jukyung and former auditor Lee Jeongjae.

Yeonggwang Saemaeul Geumgo, with assets worth about 230 billion KRW, is the only one among the four Saemaeul Geumgo branches in Yeonggwang (Yeonggwang, Baeksu, Yeomsan, Beopseong) to elect its chairman through direct vote.

According to the recently revised Saemaeul Geumgo Act, any Saemaeul Geumgo with average assets of 200 billion KRW or more in 2023 is subject to direct elections in which all members can participate.

The problem is that Yeonggwang Saemaeul Geumgo is already embroiled in a controversy over candidate qualifications ahead of the chairman election. There are rumors that former auditor Lee, running against Chairman Park, actually registered as a candidate through collusion with a certain individual.

Yeonggwang Saemaeul Geumgo has been mired in internal conflict even before the final confirmation of the chairman election candidates.

This surfaced when Mr. Cho, the former executive director of Yeonggwang Saemaeul Geumgo and a strong contender against incumbent Chairman Park, was expelled (loss of Saemaeul Geumgo membership) at the Yeonggwang Saemaeul Geumgo delegates' meeting on the 7th.

In October 2018, Yeonggwang Saemaeul Geumgo executed a joint loan worth 5.9 billion KRW with five other Saemaeul Geumgo branches in other regions, including A and B Saemaeul Geumgo in Gwangju, and 16 plots (including unfinished buildings) at 318 Seongjeong-dong, Seobuk-gu, Cheonan, Chungnam.

It is reported that public welfare projects, including a nursing hospital, were planned for the building and site at that time.

Of the total 5.9 billion KRW, Yeonggwang Saemaeul Geumgo's share amounted to about one-third, or 2 billion KRW.

Normally, financial institutions secure collateral equivalent to the loan amount when lending for land and buildings. This is to minimize risks in case the project fails or is suspended. For collateral, a comprehensive assessment is made, including administrative documents such as certified copies of the registry and on-site inspections, to determine any defects.

However, Yeonggwang Saemaeul Geumgo approved the loan without proper verification, using a building without an occupancy permit as collateral, and despite serious issues such as part of the building encroaching on another person's land (320-1 Seongjeong-dong).

In particular, it was found that the building was subject to a Supreme Court demolition order due to recognized infringement of the landowner's property rights, and was even undergoing auction proceedings.

Additionally, the construction company and developer, who were jointly promoting the project, had conflicts over construction costs, resulting in the project being temporarily halted.

As a result, Yeonggwang Saemaeul Geumgo suffered losses amounting to 1,497 million KRW.

The Yeonggwang Saemaeul Geumgo side claims that, despite opposition from all employees at the time, the loan was approved under Mr. Cho's initiative.

This fact was thoroughly overlooked at the time but was revealed through an audit by the Saemaeul Geumgo Central Association last April, which led to Mr. Cho's dismissal.

Mr. Cho argued, "If the loan had been sold to asset management at the time, the losses could have been minimized," blaming the current chairman and executive team, but was ultimately expelled at the delegates' meeting with 65 votes in favor, 41 against, and 1 abstention out of 107 attendees.

It is reported that Mr. Cho was effectively campaigning for the election by sending promotional text messages to some members right up until the delegates' meeting.

Mr. Cho strongly objected, filing for an injunction against the expulsion on grounds of 'procedural flaws.'

He also claimed, "This whole process was a smear campaign to ensure the incumbent chairman's sole candidacy."

Although Mr. Cho lost his eligibility as a candidate due to expulsion, insiders say there were rumors that another candidate could emerge to represent him.

Indeed, former auditor Lee registered as a candidate in place of Mr. Cho, making the rumors somewhat true.

Furthermore, it was revealed that the two were together at a specific office in Yeonggwang-eup until just 20 minutes before the candidate registration deadline (6 p.m. on the 19th).

At the same time, Mr. Cho was reportedly waiting to receive the court's decision on his injunction application.

This leads to reasonable suspicion that there may have been some agreement between the two about who would run, depending on the court's decision.

This is the background that led to suspicions of 'proxy candidate selection through collusion.'

Meanwhile, Mr. Cho and former auditor Lee Jeongjae have different positions regarding these circumstances.

Mr. Cho stated, "It is true that I was with former auditor Lee on the last day of candidate registration," but added, "The idea of a proxy candidate is nonsense. Former auditor Lee decided to run on his own."

He continued, "Regarding the bad loan that led to my dismissal, it was a legitimate loan made together with other Saemaeul Geumgo branches, and sometimes projects don't go as planned. This case is just one of those. If there is a problem, it is that the executive team failed to handle it properly after the loan was issued, which increased the losses."

Former auditor Lee Jeongjae explained, "I was going back and forth on the day of registration to submit documents, but I was not with (former executive director) Cho. I absolutely did not run as a result of collusion or as a proxy. I have been preparing for the chairman election for a long time."

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