Yoo Dong-gyu (left) and Kim Man-bae. Yonhap News. 

Private developers implicated in the Daejang-dong development corruption allegations have received heavy sentences in the first trial. This comes approximately four years after their indictment in late 2021.

The Seoul Central District Court's Criminal Settlement Division 22 (Presiding Judge Cho Hyung-woo) delivered guilty verdicts and ordered the detention of all private developers involved in the Daejang-dong project, as well as former Seongnam Urban Development Corporation (SUDC) Planning Division Head Yoo Dong-gyu, on charges including breach of trust under the Act on Special Cases Concerning the Punishment of Specific Economic Crimes, during their sentencing hearing on the 31st.

Former Division Head Yoo was sentenced to eight years in prison, fined 400 million won, and ordered to forfeit 810 million won.

Kim Man-bae, the largest shareholder of Hwacheon Daeyu Asset Management, was sentenced to eight years in prison and ordered to forfeit 42.8 billion won. Lawyer Nam Wook and accountant Jeong Young-hak received sentences of four and five years in prison, respectively.

Lawyer Jeong Min-yong, who served as the head of the investment project team in the SUDC's strategic business division, was sentenced to six years in prison, fined 3.8 billion won, and ordered to forfeit 3.722 billion won.

The prosecution had sought seven years in prison for former Division Head Yoo and five years for lawyer Jeong; however, the sentences handed down were higher than requested.

However, the charge of breach of trust under the Act on Special Cases Concerning the Punishment of Specific Economic Crimes, as indicted by the prosecution, was not recognized due to reasons such as unspecified amounts, and only the charge of breach of duty under the Criminal Act, which carries a lighter penalty, was recognized.

The court determined that the defendants had formed collusive relationships during the establishment of the corporation and the decision-making process for the acquisition method, and had received preferential treatment as de facto project implementers.

The court characterized the case as "a series of corruption crimes committed in collusion, based on collusive relationships formed over a long period through the provision of money and valuables."

It further explained the sentencing rationale, stating, "Through the formation of collusive relationships and the pre-selection of project implementers, the joint bidding guidelines were manipulated to reflect the demands of private developers, leading to their selection as preferred bidders." The court added, "This act has significantly undermined the fairness and integrity of the project implementer selection process and public trust, thus carrying a high degree of social reprehensibility."

The court also pointed out, "The defendants, through consultation, established a policy of fixed profits that fell short of half of the projected profits, proceeding with the public bidding process and disregarding even claims for surplus profit distribution in anticipation of increased project profits. This led to the risk of enormous real estate development profits, which should have gone to local residents and the public, being distributed to private developers, a risk that materialized in the actual dividend distribution." However, the court criticized that no substantial damage had been recovered and no measures had been taken for recovery.

Former SUDC Planning Division Head Yoo Dong-gyu, indicted on suspicion of corruption in the Daejang-dong development, attends the first trial sentencing hearing at the Central District Court in Seocho-gu, Seoul, on the 31st. Yonhap News. 

The court evaluated that former Division Head Yoo, as the de facto person in charge of the development project while at SUDC, committed illegal acts in collusion with private developers. For the private developers, sentences were determined based on their individual involvement and roles: lawyer Nam Wook, who represented the group; accountant Jeong Young-hak, who designed the profit structure; journalist-turned-developer Kim Man-bae, who was recruited for lobbying related to the Daejang-dong development project designed and promoted by Nam and Jeong; and lawyer Jeong Min-yong, who joined SUDC upon Nam's recommendation and became an insider, colluding with the group.

Specifically, Yoo Dong-gyu was found guilty of effectively pre-selecting private developers as the implementers of the Daejang-dong development project and exerting influence to ensure their selection as preferred bidders by reflecting their demands in the joint bidding guidelines. The court stated, "Even during the evaluation of the project proposals, scoring was done in favor of private developers, allowing the 'Seongnam-ui-ttel' consortium, formed by private developers, to be selected as the preferred bidder," adding, "Private developers secured an advantageous position by being selected as preferred bidders."

The court ruled, "Ultimately, the joint bidding process for the Daejang-dong development project was a series of actions taken with the objective of selecting private developers as preferred bidders, with Yoo Dong-gyu and Jeong Min-yong reflecting the requests of private developers or providing them with convenience," and deemed it "an act that violated the duty to select preferred bidders through a fair joint bidding process, betraying the trust relationship with SUDC."

It was acknowledged that SUDC suffered financial losses due to the project method, which stipulated that SUDC would only receive fixed profits, with all remaining development profits going to private developers.

The court pointed out, "Private developers sufficiently anticipated that the expected development profits would exceed 400 billion won, excluding the costs for the industrial complex parkification. Nevertheless, they created the appearance that SUDC would obtain half of the total profits by understating the development profits."

SUDC received only 182.2 billion won in fixed profits from the Daejang-dong development project, and the court determined that it suffered financial losses by not receiving the actual profits, which were significantly higher.

However, the court applied only the charge of breach of duty under the Criminal Act, not the charge of breach of trust under the Act on Special Cases Concerning the Punishment of Specific Economic Crimes, as indicted by the prosecution. The penalty level was reduced due to the application of a general law rather than a special law.

The court explained, "The amount of damage for breach of trust under the Act on Special Cases Concerning the Punishment of Specific Economic Crimes requires strict proof. Since the exact amount of profit that would be obtained from the project at that time could not be precisely calculated, only the breach of duty charge was recognized, and breach of trust under the Act on Special Cases was not."

Lawyer Nam Wook, indicted on suspicion of corruption in the Daejang-dong development, attends the first trial sentencing hearing at the Central District Court in Seocho-gu, Seoul, on the 31st. Yonhap News. 

The sentencing reasons for the five individuals varied based on their degree of involvement.

Regarding former Division Head Yoo, the court noted, "He formed collusive relationships with private developers through the exchange of money and valuables, creating a risk of substantial damage to SUDC. As the de facto person in charge of the Daejang-dong development project for SUDC, he led the breach of trust by approving the coordinated arrangements with private developers and proceeding accordingly."

The court also recognized that Yoo Dong-gyu received a bribe of 310 million won from lawyer Nam. However, it considered that he admitted to the offense during the investigation, providing clues for establishing the facts, and primarily acted as an intermediary who coordinated opinions with private developers for key decisions made by SUDC leadership.

Concerning Kim, the court mentioned his lack of involvement in the early stages of the development project led by Nam Wook and Jeong Young-hak. However, it determined that he actively participated in the breach of trust by making final decisions as the largest private shareholder (49%) and de facto representative after joining the project, and ultimately reaped the most substantial economic benefits from the distribution results.

In the case of lawyer Nam, he was identified as the person who led the Daejang-dong development project from its early stages until he ceded control to Kim Man-bae around late 2014. The court stated, "As the representative of private developers, he formed collusive relationships by providing substantial financial and property benefits, such as large sums of money, to Yoo Dong-gyu and others, and significantly contributed to the private developers being pre-selected as project implementers." It is known that Nam brought in Kim Man-bae to act on his behalf and handle lobbying matters after being arrested during the project's progression. However, the court deemed his level of participation in the breach of trust to be relatively minor.

Regarding accountant Jeong, the court pointed out, "He played a pivotal role on the private side in the breach of trust process from the early stages of the Daejang-dong development project alongside Nam Wook, including fundraising for PF loans, consortium formation, project proposal writing, and project profitability estimation." However, providing the so-called 'Jeong Young-hak recording' during the investigation was recognized as a mitigating factor.

Furthermore, concerning lawyer Jeong, the court stated, "Despite recognizing the risk of causing damage to SUDC, he uncritically accepted the requests of private developers without objective and rational review." His acceptance of a bribe of 3.722 billion won from lawyer Nam and the falsification of related documents were also reflected in the sentencing.

However, charges of violating the Act on the Prevention of Conflicts of Interest for Public Officials related to the Seo-Pangyo Tunnel project were all dismissed as not guilty. The prosecution argued that the information about 'the location of construction and that a tunnel would eventually be built at that location' constituted confidential information under the Act on the Prevention of Conflicts of Interest, but the court ruled it did not fall under the definition of confidential information.

Additionally, the court ruled not guilty on the grounds that the 500 million won provided by Kim to Yoo Dong-gyu and the agreement to provide an additional 42.8 billion won were merely a distribution of a portion of the profits derived from the joint breach of trust, and thus could not be additionally punished as bribery.

They were indicted between October and December 2021 on charges including earning unjust profits of 788.6 billion won by drafting joint bidding guidelines in favor of Hwacheon Daeyu and selecting the Seongnam-ui-ttel consortium, in which Hwacheon Daeyu participated, as the preferred bidder in relation to the Daejang-dong development project, and causing 489.5 billion won in losses to SUDC.

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