'I only worried about public funds,' says Gov. Lee

Politics

Published: 18 Oct. 2021, 18:22

'I only worried about public funds,' says Gov. Lee

Gyeonggi Governor Lee Jae-myung speaks before the National Assembly's Public Administration and Security Committee at the Gyeonggi provincial government's office in Suwon, south of Seoul on Monday afternoon. [NEWS1]

The ruling Democratic Party's (DP) presidential nominee, Gyeonggi Governor Lee Jae-myung, pushed back Monday on allegations that he masterminded the Daejang-dong development project to favor acquaintances during his time as Seongnam mayor.

Speaking before the National Assembly's Public Administration and Security Committee, which conducted an audit of the Gyeonggi provincial government in the provincial capital of Suwon, Lee said his role in the Daejang-dong development was focused on the proper use of public funds.

"You may want to imply that I was involved in the distribution of profits from the project among private investors, but I designed the project with guarantees and policies to ensure the restitution of public money invested in the project," Lee said in response to a question about the project's set-up by opposition People Power Party (PPP) lawmaker Lee Young.

He added, "I designed the project with a fixed profit distribution scheme so companies that lobbied [us] couldn't run off with large amounts of money. I made sure that large financial institutions were involved. That is how I designed the project."

Lee also disavowed a former aide who has been arrested as part of the official probe into the Daejang-dong scandal, claiming he felt "betrayed."

Speaking to reporters before he entered the audit, Lee said that the arrest of Yoo Dong-gyu, former acting president of the Seongnam Development Corporation, was "truly regrettable" and that he felt "personally betrayed" by revelations of Yoo's involvement in the scandal.

Lee added, "I still can't believe [the charges against Yoo] myself, but if the court issued an arrest warrant for him, there must be something wrong."

Yoo was arrested Oct. 3 on charges of breach of trust and bribery under the Special Economic Crimes Act. He is accused of receiving 1.1 billion won ($930,138) in return for designing a profit distribution scheme that favored certain private companies that invested in the Daejang-dong project, causing the city losses.

Yoo's connection to the Gyeonggi governor as a former aide who worked on his mayoral and gubernatorial campaigns, and his alleged role in the Daejang-dong development, have emerged as a major lightning rod for political controversy in the lead-up to the March presidential race.

Opposition lawmakers are determined to use the audit to prove their suspicions that Lee, who was Seongnam mayor at the time the project was launched, was the main force behind a profit distribution scheme to award small asset management company Hwacheon Daeyu a thousand-fold return on its investment in the 2015 Daejang-dong land development in Seongnam, Gyeonggi, just south of Seoul.

The company, owned by former journalist Kim Man-bae, reaped a profit of 57.7 billion won on an investment of 49.95 million won, which was a 1 percent stake in the mixed public-private development consortium.

The company also made 300 billion won in sales of apartments in the development, while its Cheonhwa Dongin affiliates reaped in an additional 400 billion won in profits.

The city-owned Seongnam Development Corporation reportedly only received 183 billion won in profits over the past three years, despite holding a 50 percent stake in the development consortium.

Lee’s relationship with Kim, who interviewed him in 2014, has also attracted scrutiny and fueled speculation over the DP presidential nominee’s role in the scandal.

That speculation was further fueled by 19 recordings submitted to the state prosecution service by an accountant named Jeong Young-hak, who owns Cheonhwa Dongin No. 5, an affiliate of Hwacheon Daeyu.

According to a source in the prosecution service, Kim, in one of the taped conversations, described an individual whom he only referred to as “that person” as owning 50 percent of Cheonhwa Dongin No. 1, another Hwacheon Daeyu affiliate, which reaped more than 120 billion won in profits from the project.

Lawyer Nam Wook is detained by prosecutors at Incheon International Airport shortly after his arrival from Los Angeles on Monday early morning. [NEWS1]

Lawyer Nam Wook, another key figure in the case, told JTBC in an Oct. 12 phone interview that Kim had previously told him that half of the shares in Cheonhwa Dongin No. 1 belonged to an unspecified individual. He added that Kim and Yoo referred to each as “big brother” and “little brother,” and that the expression “that person” likely referred to someone else.

The potential existence of a third individual besides Kim and Yoo as a beneficiary of the Daejang-dong project’s profit distribution scheme has led to claims by the PPP and its presidential frontrunner, former Prosecutor General Yoon Seok-youl, that Lee is “that person.”

Nam, who has been in the United States since mid-September -- before the scandal broke -- was immediately detained by investigators and taken to the Seoul Central District Prosecutors’ Office for questioning upon arrival at Incheon International Airport early Monday morning.

The lawyer joined the city-run project as a private partner and made about 100.7 billion won through his company on an investment of 87.21 million won.

BY MICHAEL LEE [lee.junhyuk@joongang.co.kr]