The Ministry of Agriculture, Food and Rural Affairs said on the 8th it has asked police to investigate allegations of breach of duty by employees and executives of the NongHyup Foundation. The ministry also referred to investigative authorities allegations that the National Agricultural Cooperative Federation covered legal fees for criminal cases involving its employees and executives.
The ministry released interim results of a special audit of the National Agricultural Cooperative Federation and the NongHyup Foundation the same day. The ministry asked police to investigate two cases in which legal violations, including alleged breach of duty by employees and executives, were identified. The audit was launched after allegations of wrongdoing involving NongHyup were repeatedly raised during a National Assembly audit in Oct. last year.
During the audit, allegations were raised in succession about parachute appointments at the National Agricultural Cooperative Federation, vote-buying during cooperative leader elections, and cases of embezzlement and improper lending at regional agricultural and livestock cooperatives. The controversy grew after National Agricultural Cooperative Federation President Kang Ho-dong came under police investigation on suspicion of receiving money and valuables from an affiliate transaction partner ahead of the presidential election. Police conducted searches and imposed an overseas travel ban on Kang on suspicion that he received money and valuables twice from the head of a service contractor ahead of the presidential election at the end of 2023.
The ministry also uncovered 65 violations identified in the audit (43 at the National Agricultural Cooperative Federation and 22 at the NongHyup Foundation). The ministry said it will issue prior notices of disposition within this month and finalize the dispositions after completing appeal procedures.
The ministry said the audit also found that the federation has routinely offered excessive perks, including giving a mobile phone worth 2.2 million won to every cooperative leader attending the delegates' meeting (a total of 2.346 billion won).
The ministry also pointed to internal control issues at NongHyup. The ministry said the executive nomination process was run in a closed manner. The National Agricultural Cooperative Federation operated the personnel recommendation committee for executive nominations in a limited and closed way, and cases were found in which the federation's personnel department adjusted promotion numbers for appointments to the cooperative audit committee, undermining personnel independence.
There were also indications that disciplinary actions for employee and executive misconduct were carried out in a perfunctory manner. Even in cases with suspected criminal conduct, the committee did not deliberate whether to file complaints, and sexual harassment disciplinary panels were composed mainly of insiders, raising concerns about the fairness of the process. Allegations over the use of public funds were also included in the audit scope, such as the federation president's overseas lodging expenses exceeding the standard and failures to disclose business promotion expenses.
The ministry also signaled additional audits. It said it will conduct additional reviews of 38 cases that require further fact-finding and expand on-site audits of member cooperatives.
Discussions on institutional reform will also move into full gear. The ministry plans to revise the "six-month special statute of limitations" that has been criticized for fueling money-driven elections in NongHyup races. Vice Minister Kim Jong-gu said, "There is a widespread perception that even if illegal funds are used in NongHyup elections, one can avoid punishment if six months pass," adding, "Institutional reform, including scrapping the special statute of limitations, is needed to shift to policy-centered elections."
The scope of the audit could be expanded to the financial sector. To facilitate additional audits of the National Agricultural Cooperative Federation and the NongHyup Foundation, the ministry will establish a joint audit framework involving the Office for Government Policy Coordination, the Financial Services Commission, and the Financial Supervisory Service. This has fueled expectations that the internal controls and management conditions of NongHyup Financial Group and its affiliated financial companies could also be brought under review.
A ministry official said, "We also plan to refer for investigation, if necessary, tips on alleged receipt of money and valuables by employees, violations of the anti-graft law, provision of undue benefits to specific companies, and improper personnel interference in affiliates."