The development project for the Yuseong District industrial complex in Daejeon, funded by the Industrial Bank of Korea, was designed to funnel 89% of the development profits to private investors, as revealed by an audit by the Board of Audit and Inspection. The Industrial Bank of Korea gave up public investment profits of 63.2 billion won and transferred over 200 billion won to private investors. This method of channeling development profits from local government projects to private investors is similar to the "Daejang-dong development project" in Seongnam. The Head of Team responsible for this project at the Industrial Bank of Korea is currently under investigation by prosecutors.
According to an audit report by the Board of Audit and Inspection released on the 19th, the expected development profit from the Ansan Advanced Defense Industry Complex project in Daejeon, participated in by the Industrial Bank of Korea and the Industrial Bank of Korea, was estimated at 244.1 billion won. The audit revealed that the Industrial Bank of Korea contracted to distribute 89% of this development profit to private investors and persuaded the other investor, the Industrial Bank of Korea, to do the same.
The Ansan Defense Industrial Complex is a project that aims to supply industrial land and research facilities linked to the defense industry, covering an area of 1,591,000 square meters by lifting the development restrictions in the Daejeon Yuseong District (greenbelt). The total project cost was approximately 1.28 trillion won.
Initially, the project was planned to be conducted by the Daejeon City and Korea Land and Housing Corporation, but after various twists and turns, including a failure in private bidding, the Industrial Bank of Korea stepped in. The Industrial Bank of Korea suggested a private joint development method with local private developers to the Daejeon City. Daejeon City accepted the proposal from the Industrial Bank of Korea, leading to the establishment of a special purpose company (SPC) in December 2020 with a capital of 7 billion won, jointly founded by the Industrial Bank of Korea, the Industrial Bank of Korea, the Construction Workers Mutual Aid Association, and private companies S and D. The equity stakes of the Industrial Bank of Korea and the Industrial Bank of Korea in the SPC stood at 14.3% each, while S held 10% and D held 39%.
In the process of signing a shareholders' agreement, the Industrial Bank of Korea waived its rights to the distribution of development profits amounting to 31.6 billion won and agreed to receive only the invested principal with an annual interest of 10% and financial arrangement fees. It even received only common shares instead of preferred shares, which carried dividend rights. The Industrial Bank of Korea also persuaded the Industrial Bank of Korea to enter into a shareholders' agreement under the same conditions. The development profits forfeited by the two national policy banks amounted to 63.2 billion won. Ultimately, 89% of the development profits were acquired by S and D. During this process, the Construction Workers Mutual Aid Association rejected the demands of the Industrial Bank of Korea and secured rights to preferred shares and part of the land.
However, the audit revealed that the owners of S and D were acquaintances of A, the former Head of Team in charge of the PF at the Industrial Bank of Korea. A was confirmed to have been responsible solely for PF operations at the Industrial Bank of Korea for about 10 years from 2014 to 2023. A is currently under investigation by prosecutors. Upon the revelation of this information during the audit, the Ministry of Land, Infrastructure and Transport rejected the approval for lifting the development restrictions, deeming it illegal.
The Incheon Namchon Industrial Complex development project that A was in charge of was also designed to channel profits to private investors in a similar manner to the Ansan Defense Industrial Complex. The Industrial Bank of Korea entered into a side contract with private investors to receive the investment principal of 375 million won for a 15% stake in the SPC and interest at an annual rate of 10%, in return for waiving dividends amounting to 5.6 billion won.
The Board of Audit and Inspection instructed the Industrial Bank of Korea to amend the contracts for these projects and ensure that development profits do not get transferred to private entities, emphasizing the need for rigorous management of operations. Additionally, it demanded disciplinary action (dismissal) against A. An industry official noted, "I understand that A is currently not employed by the company."
The Industrial Bank of Korea stated that it would complete the necessary actions regarding the issues raised by the Board of Audit and Inspection within a specified period and ensure that similar cases do not occur in the future.