Ruling party presidential candidate rebuts criticisms on Seongnam scandal

Democratic Party of Korea presidential candidate Lee Jae-myung takes the oath during a National Assembly audit at Gyeonggi Province Office in Suwon, Monday. Joint Press Corps

Scandal affects Lee's approval rating

By Nam Hyun-woo

Democratic Party of Korea (DPK) presidential candidate Lee Jae-myung refuted main opposition People Power Party (PPP) lawmakers' questions and criticisms on a land development scandal in Seongnam, Gyeonggi Province, Monday, reiterating that members of the opposition party were at the center of the problematic scheme, during a National Assembly audit of the provincial government.

Lee appeared at the Assembly Public Administration and Security Committee audit as governor of the province and most of the questions focused on the scandal and allegations linking him to the suspicious land development project in Seongnam in 2015, when he was the city's mayor.

PPP lawmakers asked a barrage of questions on Lee's alleged connection to Hwacheon Daeyu, an asset management firm for the project that raked in massive profits thanks to a suspicious dividend structure, but failed to present key evidence connecting him to the company. Representatives from the DPK sought to protect their candidate by highlighting people from the opposition bloc who benefited from the scandal.

During the audit, PPP Rep. Kim Do-eup alleged Lee was the owner of Hwacheon Daeyu, saying "The man [Lee] does not take political funds from large corporations. Rather the man makes his own political funds by giving development licenses to certain companies."

Kim also pointed out that former Supreme Court Justice Kwon Soon-il had been paid 15 million won ($12,600) every month since last November by Hwacheon Daeyu to be its legal advisor, claiming this appeared to be a favor given to the judge who ruled in favor of Lee when the Supreme Court acquitted him of violating the Public Official Election Act in July 2020.

Democratic Party of Korea (DPK) presidential candidate Lee Jae-myung shows a panel that reads "a man who receives stolen money is a thief" during a National Assembly audit of Gyeonggi Province at the provincial office in Suwon, Monday. Joint Press Corps

"When we say someone is thief, we say so because that person has the stolen money," Lee said. "If I were the owner of Hwacheon Daeyu, I would rather give money to a dog, than bribing Rep. Kwak Sang-do of the PPP."

Kwak left the PPP and resigned as a lawmaker after reports that his son received 5 billion won in retirement pay from Hwacheon Daeyu after working there for just six years.

DPK Rep. Back Hye-ryun supported Lee by stating that Kwak and other people who purportedly benefited from links to the company were all from the opposition bloc.

The scandal broke after reports that Hwacheon Daeyu, a small newly established asset management firm, pocketed more than 400 billion won in dividends, despite the asset manager and an associated trust company only owning 7 percent of the project developer, Seongnam's Yard Corp. The amount collected was more than 1,000 times its initial investment and accounted for 68 percent of the total profits from the public-private partnership project.

This was possible due to a suspicious dividend structure that gave the city-run Seongnam Development Corp., the largest stake owner of Seongnam's Yard Corp., the first payment of a fixed dividend while allowing Hwacheon Daeyu to take the remainder.

During the audit, PPP lawmakers questioned the process of this dividend structure being approved, but Lee blamed Seongnam Development Corp. Acting President Yoo Dong-gyu, saying "I sincerely apologize to the public for the corruption of some officials under my command."

Lee continued that he had long attempted to carry out the land development project as a public project, but the PPP prevented him from doing so.

"The PPP was bribed to propose a private project and a PPP lawmaker disrupted Seongnam from developing the land in a public project," Lee claimed. "And those who benefited from the private company (Hwacheon Daeyu) were a PPP lawmaker or lawyers who are close to the PPP."

Nam Wook, center, a lawyer who is suspected of playing a key role in a land development scandal in Seongnam, is escorted from Incheon International Airport, Monday, by investigators of the Seoul Central District Prosecutors Office. Yonhap

While the audit is yet to find a key evidence that connects Lee with Hwacheon Daeyu, a key suspect in the scandal arrived here and was detained for questioning.

Officials from Seoul Central District Prosecutors Office detained Nam Wook at Incheon International Airport early Monday to grill him over his involvement in the scandal. Nam, a lawyer, is believed to be the key figure who designed the dividend structure benefiting Hwacheon Daeyu, and colluded with Yoo to have the asset manager selected as a partner.

During an interview with broadcaster JTBC, Nam denied any wrongdoing, claiming he had been sidelined from the project in its early stages. He blamed other key figures, including Yoo and Kim Man-bae, the nominal owner of Hwacheon Daeyu.

As the scandal continues to snowball, Lee's approval rate is being affected. In a Korea Society of Opinion Institute poll pitting Lee against various PPP presidential contenders, Monday, Yoon Seok-youl scored support of 37.1 percent to Lee's 35.4 percent. He also lost out to Hong Joon-pyo, 35.9 percent to 34.6 percent.

Lee will appear at another audit, this time by the National Assembly Land, Infrastructure, and Transport Committee, Wednesday.