[인터뷰-1] I agree to the violation of the National Emotional Law
‘Zero’ Profits Take the risk and run the business
Real estate prices skyrocketed, making huge profits
“If you understand the business structure properly, the suspicion will be resolved.”
I have never given anything of value to public officials or politicians, and there is no collusion
“I will actively cooperate with the investigation… I will submit all materials.”
“I can’t stand the company being viewed as an immoral group any longer,” he said.
Seongmoon Lee (54), CEO of Hwacheon Daewoo Asset Management, who is suspected of preferential treatment in connection with the development project in Daejang-dong, Seongnam-si, Gyeonggi-do, opened his mouth. On the afternoon of the 18th, CEO Lee met with the Hankook Ilbo at the Hwacheon Daeyu office in Seongnam and poured out what he wanted to say for nearly three hours.
This is the first time that CEO Lee, who has been in charge of management since the company was founded in February 2015, is directly in front of the press. At first, he said, “I do an interview, but I don’t want to take pictures,” but he allowed me to take pictures, saying, “It would be nice if my photos could guarantee the credibility of my words even a little.”
The suspicions about Hwacheon Daeyu raised by politicians and the media are largely two-fold. First of all, there are many things that are not clear about the background of the huge profits of Mr. Kim, a former journalist who is the major shareholder of Hwacheon Daewoo, and the six investors Kim brought in, and there are suspicions that there was a preferential treatment in the selection process.
At an asset management company (AMC) unfamiliar to the name of Hwacheon Daeyu, influential figures such as former Special Prosecutor Park Young-soo, former Suwon District Prosecutor Kang Chan-woo, former Supreme Court Justice Kwon Soon-il, Kwak Sang-do People’s Power Rep. His tenure also raised his doubts.
During the interview, CEO Lee Seong-moon actively refuted the various allegations raised so far. He said, “Some people are reporting that we made huge profits through immoral methods without ‘fact checking’. All the risks were borne by us. We should not evaluate the results based on the results (that we made a lot of money).”
In particular, CEO Lee emphasized, “There is not a single case of illegal activity in collusion with public officials or politicians while conducting business. Since allegations have been raised, we are expecting an investigation. Once the investigation begins, we will submit all materials and actively cooperate.” However, regarding the fact that a small number of private investors made hundreds of billions of won in dividends, CEO Lee said, “I agree that there are parts that are not convincing from the public sentiment.”
The Hankook Ilbo reports an interview with CEO Lee Seong-moon twice. Until now, the position of Hwacheon Daeyu has not been known in detail, so we decided to publish the representative’s position as much as possible. Reports verifying the representative’s claims and reports on allegations that are still unresolved will be published later.
“The investment is 50 million won, the actual investment cost is 35 billion won”
The land at the center of the controversy was 960,000 square meters (290,000 pyeong) in Daejang-dong, Seongnam-si, Gyeonggi-do, and was selected as the last yolk land remaining in the Seongnam area after the development of Pangyo New Town was completed. Korea Land and Housing Corporation (LH), a public corporation, tried to develop it directly, but it was canceled due to suspicions of leakage of development information. Then, in 2015, Governor Lee Jae-myung, who was the Mayor of Seongnam, decided to promote Daejang-dong as a ‘public development’, and for this purpose, ‘Seongnam Garden’ was established, a joint public-private special purpose corporation. When Seongnam City was unable to finance the land purchase cost of more than KRW 1 trillion for public development, the Seongnam Urban Development Corporation decided to select a private operator to secure the profits and raise funds through the Seongnam Urban Development Corporation.
The paid-in capital of Seongnam Ui Garden was 5 billion won, half of which was contributed by Seongnam Urban Development Corporation, 2.5 billion won, and 2.15 billion won, respectively, by banks and insurance companies. Then, of the remaining 350 million won, Hwacheon Daeyu and SK Securities invested 50 million won and 300 million won, respectively.
Seongnam Ui-Tulle shares are divided into preferred stock and common stock.
Preferred shares were shared by financial companies such as Seongnam Urban Development Corporation (50.0001%), KEB Hana Bank (14.0%), KB Kookmin Bank, IBK Industrial Bank, Dongyang Life Insurance (8.0% each), and Hana Asset Trust (5.0%). Common shares went back to SK Securities (6%) and Hwacheon Daewoo (0.9999%).
Seongnam Urban Development Corporation designed the business structure so that they receive first priority until the cumulative dividend reaches KRW 182.2 billion. Financial institutions with second priority shares after Seongnam Urban Development Corporation receive a certain amount of dividends, and any remaining profits are to be distributed to common stock.
However, suspicions were raised as real estate prices soared and Hwacheon Daewoo and SK Securities, which own common stocks, received more dividends than expected. Hwacheon Daewoo, which has a 1% stake, and SK Securities, which has a 6% stake, have received 57.7 billion won and 346.3 billion won, respectively, in dividends so far. The stake in SK Securities is a specific money trust (a trust product in which the customer directly specifies the method of asset management), which is comprised of six individual investors recruited by Mr. Kim, who owns 100% of Hwacheon Daeyu. In the end, a small number of people directly or indirectly connected to Hwacheon Daeyu received a huge dividend income of 404 billion won.
– The biggest controversy is that Hwacheon Daewoo, which had only 50 million won in capital, received more than 50 billion won in dividend income.
“If you have ever run a business, you will know very well that capital and operating expenses are different. The capital is only 50 million won, and Hwacheon Daewoo achieved 700 billion won in project financing (PF) for financial institutions from May 2015 to December 2016. Only about 35 billion won was invested sequentially until the end of the project period. , collect loans with the proceeds of the project) about 7.2 billion won for the deposit for the implementation of the business agreement, 12.5 billion won for various licensing and licensing services, about 9.5 billion won for asset management and project management fees, and other 5.8 billion won. Since it was deposited into the Seongnam Ui Garden account and used for business expenses, the exact details remain.”
-By the way, the one with 50% of the stake earned 182.2 billion won and the one with 7% received 404 billion won as dividends, so isn’t that saying ‘it’s not common sense’?
“Seongnam City has created a structure in which they never lose money in the Daejang-dong development project and extract all the desired profits whether the business goes bankrupt or prosper. A considerable amount of urban infrastructure (tunnels, etc.) also received arrears in donations. This is what Mayor Lee Jae-myung said was a model project that attributed 550 billion won of public profits. From the standpoint of Seongnam City, it means that they do not invest even a single won and earn more than 500 billion won in profits.
The important thing is that it has a structure in which fixed profits are guaranteed to preferred stocks (Seongnam Urban Development Corporation and financial institutions) and the remaining profits are distributed to common stocks (Hwacheon Daeyu and SK Securities). If there was no profit, Hwacheon Daiyu started a business with a risk that could not be saved even a single penny.”
-There are three major risks in real estate development or apartment sales: △licensing, △ acquiring land, and △changes in real estate prices. However, since Seongnam Urban Development Corporation is the major shareholder in this project, there is an opinion that the risk of licensing and land acquisition was also small from the perspective of Hwacheon Daeyu, a private operator.
“That’s a story I’m not familiar with. Usually, when conducting a new town development project, we face numerous collective complaints from people living in the project area. I would like to ask a question to anyone who argues that there is a risk because it is a land expropriation method, but it can be accepted according to the law. ‘LH When a new town development project is carried out nationwide, it should be accepted according to the law, but why is it that so many group civil complaints occur that the project period is prolonged and social problems arise?’ In the Daejang-dong area, there were more than 280 tombs including the land of the Jongjungwon, houses, and the tombs of the Jongjungwon, including the 4 clan. We have to reach an agreement with Jongjong unconditionally. The risk of land expropriation was also quite high.”
-Pangyo is now a golden land. Couldn’t anyone have expected that land prices would rise and bring high profits to business owners?
“We have to look at the situation from 2014 to 2015, not 2021. At that time, who among the Korean people expected that real estate prices would soar like now? There would have been very few. Until 6 years ago, it was a ‘deungbojap’ land. Even me, I thought that Daejang-dong was a mountain village. The official name of this project was originally ‘Seongnam Daejang-dong and Industrial Complex 1 Combined Urban Development Project’. After changing it to ‘Pangyo Daejang District’ After being exposed here and there for a year, the perception of ‘Daejang-dong = Pangyo’ arose. Such brand naming worked.”
– In 2015, when Seongnam Urban Development Corporation announced a bid for the Daejang-dong development project, in addition to the Seongnam Eui Garden Consortium, the Meritz Securities Consortium (Mertz Financial Securities, Korea Exchange Bank) and the Korea Development Bank Consortium (KDB, Busan Bank, Jeonbuk Bank, Daewoo Securities) ) did not participate. It seems that there is a possibility of success, so it seems that financial companies formed a consortium and jumped into it.
“The new town development project has only been done by LH so far, and there is no precedent for a public-private partnership like this. Therefore, it was difficult to persuade financial companies who were very unfamiliar with it. There are more than 30 financial companies we contacted, but only 10 went to PF. You can tell just by looking at the participation. We initially planned to fill 1 trillion won with PF after the start of the business, but we had to lower it to 700 billion won.”
-Then, is it that Hwacheon Daewoo has taken all the risks of real estate price fluctuations?
“That’s exactly what we want to say. The Daejang-dong development project is a new town development project. The project period is very long. If you build an apartment in a residential area, you can pre-sale, so money comes in two years after you get a license. On the other hand, the new town development project It usually takes 5 to 10 years, or at most 15 years or more. Because of the long business period, there is a high risk of economic fluctuations. This is the reason why many real estate development companies went bankrupt when the global financial crisis like the Lehman crisis in 2010 struck. The development project started in 2015 and is expected to be completed in December 2021. It is a project that will take 7 years. If the Lehman crisis came in 2017 or 2018. So if the project is held, can Seongnam City take responsibility for the loss of the operator? .
We can be blamed if we made relatively more returns when we shared the risk with Seongnam City. But we took all the risk, and as a result, real estate prices skyrocketed and we only made more profits than we expected.”
– In addition to dividend income, Hwacheon Daeyu made huge profits by directly implementing 5 blocks (4 apartment buildings, 1 row house) out of 15 blocks (12 apartment houses, 3 row houses) in the Daejang District.
“When we submitted the business plan, the investor offered to use some of the site directly, and this was accepted and only implemented as planned. The appraised price for an exclusive area of 85 square meters (25 pyeong) or less, and competitive bidding for more than 85 square meters. Selling the residential land Hwacheon Daeyu bought less than 85 square meters at an appraised price, so it did not receive any unfair privileges.
Rather, we set the price lower than other developers. In December 2018, the sale price of apartments sold by other developers in the Daejang-dong area was 24.3 million won per pyeong, but we set the apartment sale price at 20.3 million to 20.8 million won in response to the low-sale price policy of Seongnam City at the time. We could do it at the same level as other developers’ prices, but as a shareholder in the urban development project, we thought that we shouldn’t go for a high sale price. The apartment we sold is 1,900 units, and the price is 4 million won per pyeong cheaper than the market price. In effect, 228 billion won was returned to the citizens of Seongnam.
In the case of other consortiums that participated in the bidding for the selection of businesses with us, some said that they would directly implement all apartment houses in the Jangjang district. To claim that the investor’s business execution is a privilege given only to us is to say that we have no idea how the overall business has progressed.”
“There was no lobbying by public officials or politicians. Everything will be revealed through the investigation.”
There are also doubts about the process of Seongnam Urban Development Corporation’s selection of Seongnam Ui Garden as the preferred bidder for the Daejang-dong development project. The Meritz Securities Consortium, Seongnam Eui Court Consortium, and Korea Development Bank Consortium submitted a business proposal on March 26, 2015, and the next day Seongnam Eui Court Consortium was selected as the preferred bidder. Some observers point out, “It is quite unusual to review a business plan worth 1.5 trillion won in one day.” There is a suspicion that Seongnam Ui Garden has been appointed as a business operator in advance.
– It is controversial that the private contractor was selected as the preferred bidder within one day of the closing of the bid.
“(On the day of the screening), I called the judges at 7 am and heard that they gathered during the day to judge. I know that the short-term was to prevent the ‘strange lobby’ from leaking out.”
It was also revealed that Cheonhwa-dongin No. 2-7, an actual investor of SK Securities, which participated as a private operator along with Hwacheon Daewoo, were relatives and acquaintances of Kim, the major shareholder of Hwacheon Daewoo. Cheonhwa-dongin No. 1 was owned by Hwacheon Daeyu, Cheonhwa-dongin No. 2 and 3 were relatives of the major shareholder Kim, No. 4 a lawyer Nammo, No. 5 accountant A, No. 6 a lawyer Jo, No. 7 a former journalist B. . Among them, lawyer Nam and lawyer Cho are from Gangnam, a law firm where former special prosecutor Park Young-soo, who served as an advisor to Hwacheon Daeyu, worked. Cheonhwa-dongin No. 1 shared 120.8 billion won, and No. 2-7 shared a dividend of 225.5 billion won.
– The real investors of Cheonhwa-dongin No. 2~7 have been revealed.
“No. 2 and 3 are relatives of Mr. Kim, who is the major shareholder, and most of the people who have invested with Mr. Kim in the past, 4 and 7, have suffered losses. Mr. Kim distributed them according to their respective roles in the course of business. The lawyer helped with the holding work, and the accountant Mr. A helped with the accounting.”
-Some view the investment in the form of a specific money trust through SK Securities as an expedient to hide the shareholders.
“There is a suspicion that there is a borrowed-name shareholder, but there is no such thing. I think it was presumed that because there have been unsatisfactory things about development projects in the past. He was handed over to trial on the charge of accepting 83 million won from the CEO of the developer in exchange for lobbying, but was acquitted.
– As a result, hundreds of billions of won in profits went to a few people.
“I agree to some extent that it is difficult to understand from the public sentiment. However, during this project, we also spent 92 billion won, which was not in the original business plan, in the name of arrears in donations at the request of Seongnam City. We lowered the sale price to give 228 billion won to Seongnam citizens We also returned the interests of the company. I think we are doing our best not to be ashamed of ourselves.”
-Are you personally acquainted with Gyeonggi Governor Lee Jae-myung?
“I don’t know. I’ve only seen it once in court. (※CEO Lee Seong-moon appeared in court as a witness related to Governor Lee Jae-myung’s violation of the Public Official Election Act.)
-Why did you decide to work as CEO of Hwacheon Daeyu?
“Around January 2015, Mr. Kim, the major shareholder of Hwacheon Daeyu, asked, ‘I am preparing to develop Daejang-dong, and I want you to take on the role of CEO.’”
CEO Lee Seong-moon is a lawyer who graduated from Sungkyunkwan University Law School and has experience in operating Haengdam Rest Area. He served as the CEO of Haengdam Ocean Park, the operator of the Haengdam Rest Area, until early 2013. Since then, he is said to have received a proposal from Mr. Kim while working as a lawyer. Mr. Kim also graduated from the Department of Oriental Philosophy at Sungkyunkwan University, and has a senior-junior relationship with CEO Lee.
-What was the reason for accepting Mr. Kim’s offer to take over as CEO of Hwacheon Daeyu?
“Kim is a longtime senior who has been with me for more than 20 years. Mr. Kim is the real owner of Hwacheon Daewoo, but he has not been involved in any management. The management of the company has been entirely my responsibility since its establishment and I know best. Starting this kind of business, me and Mr. Kim There is a common point of view of the two people: that it should be transparent. There was a common consensus that slush funds should never be raised, bribes are not accepted, and solicitation is not allowed. ”
-The unusual names of companies such as Hwacheon Daeyu or Cheonhwa Dongin are also a hot topic.
“I know that Kim, who majored in Eastern Philosophy, is also interested in the leading role, so he decided to do this. It means that work can be accomplished.”)
– As the politicians continue to raise the issue, there is a possibility that it will lead to various accusations.
“I am confident that I will be investigated. I assure you, I have never given anything of value to any public official or politician, and I did not commit any misconduct in collusion with them. I am prepared to start an investigation, including account tracking. The investigation will reveal that there are no problems.”
– Last April, the Financial Intelligence Unit (FIU) reported to the police that it had caught a suspicious flow of money related to Hwacheon Daewoo, and they are currently investigating you.
“I personally borrowed money from the company and paid off the debt.
Tae-seok Yoon reporter [email protected]
Choi Da-won reporter [email protected]
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