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LH, case of real estate speculation scandal

 On March 2, 2021, Korea Land and Housing Corp, (hereafter ‘LH’) employees’ land property speculation scandal was announced by People’s Solidarity for Participatory Democracy (hereafter ‘PSPD’) and Lawyers for a Democratic Society (hereafter ‘Minbyun’). This case accused LH of property speculation: playing a key role in the public housing supply business. Antipathy from the public is spreading. In the middle of this, various investigations and measures are taken. Let’s find out how the scandal was brought out, what the events related to the situation were, and which improvements are being suggested.

 

The property speculation scandal of LH employees

 PSPD and Minbyun raised a suspicion of LH employees speculating on land worth 10 billion won while opening a press conference on March 2, 2021. The region under suspicion is Gwangmyeong, Siheung which is the 6th region among the three new towns in the Housing supply measures of government and is the largest one. Tae-Geun Kim, the chairman of Minbyun people’s economic committee disclosed at the press conference, “At the last 24th, we got a tip that the LH employees purchased land for speculation after the announcement of Ministry of Land, Infrastructure and Transport (hereafter ‘MOLIT’) that they assigned some fields of Gwangmyeong, Siheung as a 3rd new town. We checked the cadasters of the relevant regions, and confirmed the fact that several LH employees bought land in share.”

 He claimed, “After that, as a result of checking nearby sites, it is estimated that almost ten LH employees and their spouses purchased ten sites, 23,028m2 in total for about 10 billion won, that only qualifies for loans through financial institutions are almost 5.8 billion won.” As a result of comparing the Transcript of the land register, the cadasters, and the list of LH employees from PSPD and Minbyun, it was found that many of them are doing compensation work at LH and they purchased 2 sites at different times. This result was found by looking only at the data from some sites after getting a tip.

 If the sites being investigated expanded to the entire Gwangmyeong, Siheung New town, including sites acquired under the name of a spouse or relative, there is a possibility that the number of cases will increase. They judged that this act has a high possibility of violating the public service ethics act: avoiding acquiring private benefit from public office, the Anti-corruption act: avoiding property benefits using secrets learned during work and claimed public interest audit to the Board of Audit and Inspection of Korea. The MOLIT undertook self-investigation based on suggested suspicion, and released 13 LH employees from their position who were confirmed to acquire land related to Gwangmyeong, Siheung’s speculation suspicion.

 In the middle of this, more attention was gathered by the emergence of the method by which the LH employees got unfair advantages from the purchased sites. It was found that they planned to take transplant compensation fees by planting Slix matsudana f. tortuosa Rehder which is a rare tree after getting a large loan and buying some land for speculation. Mr. Kang who did land compensation work in LH for a long time purchased land in Gwangmyeong and Siheung, for 4.2 billion won with another LH employee. He planted the trees densely in three places he owned in Gwangmyeong and Siheung.

 According to JTBC’s report on March 12, 2021, the total value was found to be about 8.7 billion won after calculating the transplant compensation fee compared to the price suggested by the Public Procurement Service. Mr. Kang bought the land with other employees, so his share would be 3.6 billion won. One landscape expert who was interviewed by Joongang-Ilbo, said “It is the best skill related to compensation” after checking the photo and video of the field. At the field, about 25 trees were planted in 3.3m2 , but he argues that one tree in that space is appropriate for them to be grown properly. One official from the landscaping company said, “It is the analysis of the landscape industry that LH employees tried to increase the compensation fee in an extraordinary way that even landscape experts would not think of.” Thus, it seems that the LH employees’ acquisition of unfair benefits through the property speculation was planned from the beginning.

 

Issues related to the situation

 One LH employee posted content on the anonymous community for office workers, blind, saying “Are there any laws for LH employees not to invest in real estate?” Also, the writer claimed that “It is a matter to be judged by the court or prosecution whether they illegally speculated using internal information or speculated based on what they studied.” In order to join the community, it is necessary to be certified by company email account, so that the writer is an LH employee.

 On the 8th of the same month, about 50 farmers of the National Federation of Farmers’ Associations, etc. held a press conference in front of LH headquarters and conducted an indignation meeting shouting “Rename LH to Korea Farmland Speculation Corporation.” On this matter, one employee chatted at the mobile messenger chatroom with employees that “I cannot hear anything because I’m on the 28th floor”, uploading the picture taken in front of LH headquarter in Gyeongnam Jinjoo.

 Also, there was controversy because the photo capturing above the talking screen was posted in the community. On the 9th, the post saying “Anyway, after one or two months, it will be forgotten and will pass like water” and “I will speculate with borrowed-name and work easily until retirement” in the same community.

 About those anonymous posts of LH employees, Prime Minister Se-Kyun Chung said “It was confirmed that there was someone who wrote inappropriate posts inside (LH)” while announcing the first result of total inspection conducted for the employees from MOLIT and LH, at Central Government Complex on the 11th. He said that “I believe that this behavior that damages the dignity of public officials and adds discomfort to the public should never be forgiven, (I) will hold them responsible by investigating through all possible ways.”

 Concerning the issue, some LH employees committed suicide one after another. On 12 March 2021, senior executive, Mr. A made that extreme choice in one apartment located in Seongnam-si, Gyeonggi-do while mentioning that he “felt responsible”. He was discovered in the flower bed in front of the apartment at 10 a.m. that day and was moved to the hospital, but he finally died. Mr. A was the head of LH Jeonbuk Headquarters for two years from 2018 to early 2020.It was confirmed that he moved to the apartment near the Gyeonggi Regional Headquarters by taking the position as an expert member of LH Real Estate Finance Dept. At his house, the will was found saying that ‘I feel responsible as a regional manager’, ‘Sorry to the people and so on.’

 Meanwhile, on 13 March, the next day, LH said that employee B of LH Paju Business Headquarters was found dead in a farm container in Beobwon-eup, Paju-si, Gyeonggi-do. LH officials said, “Knowing that Mr. B was not included in the 100 persons who are subjects of the investigation by the National Office of Investigation and Gyeonggi Nambu Police Agency,” “Everyone feels terrible for the news of employees’ death for two days in a row.” It was delivered that he sent the text message saying, “I’m sorry to go first.” after speaking by phone at midnight of that day. When the police found Mr. B, he was already dead, and his will was not discovered. Also, the police said it was scheduled to check the facts after the intelligence report about real estate for Mr. B was received, but they didn’t embark on an internal investigation yet. However, after the issue spread, some media brought up the suspicion of land speculation by LH employees of Paju branch, and it was found that he was included.

 The situation gathered more attention as it was reported that there had been a whistleblower for the suspicion of real estate speculation by LH employees. On March 15, 2021, according to the material that Sang-Hoon Kim, member of the People Power Party, belonged to the Land Transport Committee received from LH, it is said that they received an insider report which is the title of ‘Inappropriate behavior using information about developing land’ from LH Red Whistle (reporting irregularities) at the end of July, last year.

 The informant claimed that “Mr. C (retiree) purchased the land in the name of his wife or his friend’s wife by obtaining the information about the land to be developed while working in the corporation,” and “He not only did this with people around him at that time, but he continues to do so. Also, while claiming that inappropriate speculation happened in Seoul, Incheon, Chuncheongnam-do, and other areas he wrote the contents in detail that he certified the residence of the employee’s family and the copy of the land that they purchased.

 However, LH closed the investigation by themselves about a month after they received the reception, which was in the middle of August, last year without confirming the details for the report. The reason for the self-closing was that matters related to retired employees are not applicable, under the regulations, as audit targets. Mr. Kim explained that “Among the 641 reports of reporting regulations to be received in the time between 2016 and July of 2021, (the report) was the only case for the speculation, considering the possibility of the borrowed-name deal through his wife, his wife’s friend, his senior’s name and the verification of attested copies, it is considered that the informant also had deep awareness for the speculation behavior of LH employees.

 

Investigation into real estate speculation by LH employees

 The government revealed on March 7, “If the real estate speculation (of LH employees) is confirmed, the request for investigation, disciplinary action with zero tolerance will be taken.” at the meeting of ministers related to the real estate market: Nam-ki Hong, Minister of Strategy and Finance and Chang-heum Byun, Minister of MOLIT attended.

 In this regard, PSPD and Minbyun claimed that the audit from the Board of Audit and Inspection of Korea is needed to relate to the real estate speculation by LH employees. They said at the comment announced on the same day, “(Government’s) measures are still abstract,” and emphasized that “The forced investigations and audits by investigative agencies should be carried out separately from the investigation by the government’s joint investigation team and the certain redemption action should be taken to the speculative actions of LH employees in the 3rd new city.” Also, they pointed out, “It is a situation where there is a high level of doubt that the government is conducting a passive investigation to take care of one’s family through the self-investigation to find out whether it is using confidential information or speculation.”

 After this controversy, the government announced the results of the ‘First full investigation’ conducted on the MOLIT and LH employees on March 11. They said that they would investigate 14,348 people: 4,509 MOLIT employees and 9,839 LH employees. Also, they said that they would continue the Second investigation of 100,000 people, including immediate family members, local government officials belonging to the housing sites, and local public company employees after the first investigation.

 However, according to the investigation results revealed by the government joint investigation team on March 19 only 8,700 people were investigated, which are 6,500 local government officials and 2,200 local public corporation employees. So, the numbers of the planned and actual investigations are different, so the doubts for the passive investigation remain.

 Meanwhile, the National Office of Investigation of the National Police Agency, which investigated the real estate speculation of LH employees started to be upgraded from the special investigation team belonged to the National Office of Investigation to the ‘Government Joint Special Investigation Headquarters’ on March 9. This is because Prime Minister, Se-Kyun Chung ordered the formation of the Special investigation Headquarters after receiving a report on ‘The Operation Plan of Real Estate Special Investigation Team’ on the 8th, the day before.

 They revealed that the court had ordered the confiscation of real estate worth 24 billion won, which was purchased by four suspects, including LH employees. This amount is more than three times the initial purchase price (about 7.2 billion won). Jae-Seong Yu, a forensic officer at the National Office of Investigation of the National Police Agency met with reporters that day and said that, “Among the 746 people, 47 who were found guilty have been sent to the prosecution, and 636 people are still being investigated.”

 Meanwhile, the National Tax Service that launched the special investigation team for the real estate tax evasion in developed areas such as new towns is quickly conducting the investigation. It undertook the first tax audit on April 1, for the 165 people who are considered the tax evaders in the large-scale development area such as new towns. They said that this will limit the scope of the investigation of tax evasion in the process of analyzing 6 areas of the planned 3rd new city, including Gwangmyeong and Siheung, and they will additionally choose subjects for a tax audit by expanding the verification target area. Also, the Real Estate Tax Evasion Report Center will be in operation which will get tip-off in writing, by phone, and from websites. The official from the National Tax Service clarified, “(We) will be stern toward those that attempt tax evasion while using tip-offs through the Report Center and dense data analysis about the tax evader in the large-scale development area.

 

The public opinions

 During the issues of the real estate speculation of LH employees, antipathy from the public is spreading. The residents of Gwangmyeong, Siheung revealed, where the suspicion was raised for the first time, expressed their confusion, and futility. One of the residents was interviewed by TBS on March 4, 2021, said, “I’m frustrated. We get restrictions whatever it is, MOLIT and LH do whatever they want…” He is the resident close to the field in Siheung that LH employees bought through the ‘share split’ method, and said that he closed his nearby business because of the development restricted area regulation. This case is causing a stir not only for residents but also for the public.

 Mr. Yoon who succeeded in getting a job expressed his anger at the interview with Chosun-Ilbo, “I got a 70 million won loan as soon as I found a job to get a small Jeon-Se (lump-sum housing lease) house.” A newly married man, Mr. Kang who got married last January complained “We looked around to get a house three months before we got married, but we failed and barely found a house to live in the middle of last month.” at the interview with Chosun-Ilbo. They added, “We feel betrayed by LH which exists for newly married couples like us, who has difficulty finding a house, but they didn’t spend time and efforts, and made a speculation suspected of using information from inside.” Likewise, the anger from the public including youth and newly married couples who need a house is spreading because the suspicion of LH employees’ speculation has raised.

 As of March 11, 2021, images satirizing the speculation suspicions of LH employees were posted on SNS and online communities. Some posts parodied while synthesizing with famous children’s books and buzzwords based on the shape of ‘LH’ which is similar to ‘내’ of Hangul. One netizen received a lot of response by releasing an image that changed the title of children’s book titled ‘It’s all mine (다 ‘내’꺼야)’ to ‘It’s all LH (다 ‘LH’꺼야)’.

 

 Also, the post drew attention that changed ‘내돈내산(The thing I bought with my money)’ which is a newly coined word to ‘LH돈LH산’. Another post satirizes the reactions and responses through movie lines after the suspicions of speculation was raised. Someone created a parody scene in which one woman asked a man, “The man has car and house. You?” When the man replied, “I work at LH,” the woman accepted his courtship. When these parodies are spread at online, netizens showed reactions of “It’s funny but bitter,” and “There are many amazing satires. I can relate to them.”

 

Reforms related to the situation

 LH President’s position has been vacant for more than 4 months since the retirement of Chang-Heum Byun in December 2020, including this situation. Therefore Hyun-Joon Kim, the former head of the National Tax Service has been appointed as the new LH President. He led the eradication of real estate speculation and reform of the National tax administration by leading the 20,000- employee National Tax Service organization from June 2016 to August 2020.

 He said, “I’m truly sorry that some of the employees caused great disappointment and concern to the people due to the real estate speculation,” and “We will be reborn as an honest and fair organization by examining the follow-up and implementation status related to the LH innovation measures of the government such as coordination of organizational functions, strengthening of internal control, and thorough management innovation.”

 Accordingly, the LH clarified that they are launching an ‘LH Innovation Committee’ to generalize the reforms of all departments in operations business on May 7, 2021. LH will discuss various agendas related to the promotion of innovation of LH by holding the Innovation Committee more than once a month. Also, they will open and operate the ‘People’s Participation Innovation Room’ at the website of LH to receive vivid and colorful suggestions from the people.

 The law that should prevent the conflict of interest by blocking the private interest of public officials including Congressman was passed on April 29, 2021, about 8 years after the discussion began in 2013. The ‘Enactment of public officials’ Interest Prevention Act’ is a measure that forbids taking private advantage using official authority and acquired information of official. For the public official who gets property benefits through unreleased information, the penalty is imprisonment of less than 7 years or a fine under 70 million won, also a third person who receives benefits by getting the information is subject to punishment.

 The law directly applies to 1.9 million people, including public officials and employees of public institutions. Among them, public officials above the vice-ministerial level, Congressman, members of the National Assembly, local legislators, and government officials are categorized as a ‘Senior Executives’ and harsher regulations apply to them. The discussion of this bill started from a suggestion of the Antio-Corruption & Civil Rights Commission in 2013, but was not passed because the range of public official duties is ambiguous, only the prohibition of solicitation was passed in a plenary session in 2015 in the ‘Kim Young-ran Act’.

 At that time, some questioned whether the political authorities only dealt with the Kim Young-ran Act when that bill was applied to Congressman who is senior executives. Since then, the politician repeated the initiation of the act for 8 years, but it was discarded several times.

 However, as the public’s antipathy towards public officials’ unfair pursuance of private interests rapidly spread due to the recent speculation issue of LH employees, the passage of the bill moved forward. About this, the Anti-Corruption & Civil Rights Commission clarified on April 30, 2021, that it will be enforced with one year of preparation period if the bill is passed.

 On the same day, they said “The Commission will make special efforts toward settling the law to recover the trust of the public society that was damaged by of the LH issue, to enter the world’s top 20 in Corruption Perceptions Index as an integrity developed country.” Following this, it is expected that the pursuance of private interests by public officials such as speculation of LH employees will be prevented and the level of integrity of our society will be raised.

 

 After confirmation of the facts through investigations of the real estate speculation of LH employees, antipathy from the public spread. The government and related organizations are moving forward with improvements to prevent this. Therefore, it seems that the investigation into this case should be completed as soon as possible, and the effectiveness of alternatives should be checked continuously.

 

유정연  wjddus0918@naver.com

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