Allegations have been raised that an association at a redevelopment establishment in Seoul illegally borrowed more than 5 billion won from a construction company. It is claimed that funds were borrowed from a construction company embroiled in a dispute over construction rights and provided to service companies without a general meeting resolution. Some members of the association are pursuing criminal complaints against the association, which states it will select a new construction company through a general assembly. However, the construction company that lent the money claims that "100% of the construction rights are held by us," leading to an escalation of the controversy.
According to the repair industry on the 7th, members of the Seoul Dongdaemun-gu Jeonnong Urban Environment Maintenance Project Association filed a complaint against the association head, a person surnamed O, at the Dongdaemun Police Station in June and submitted a petition to the Seoul Metropolitan Government and Dongdaemun District on August 4, demanding administrative and criminal action. The establishment is promoting urban maintenance-type redevelopment in the area of 28,202.4 square meters at 494-1 Jeonnong-dong, Dongdaemun-gu. In 2007, a consortium of Daewoo E&C and Dongbu Corporation obtained the construction rights. However, the consortium was dissolved in November 2016 when Dongbu Corporation entered court management.
According to the complaint, it has been 10 years since the consortium dissolved, but this establishment has not held a general meeting to select a new construction company or designate Daewoo E&C as the sole construction company. Additionally, from January 2022 to March of this year, it borrowed 5.62049 billion won from Daewoo E&C and executed service contracts with design companies, among others. The "Urban and Residential Environment Maintenance Act" states that when a consortium is dissolved, the construction company must be redetermined through a general meeting of the association.
Even if a construction company has construction rights, it is required to receive approval through a general meeting when borrowing funds such as project costs from the construction company. This association borrowed funds from Daewoo E&C arbitrarily, without selecting a new construction company and executing a contract, leaving it unclear whether Daewoo E&C indeed holds the construction rights.
Kim Ye-rim, the legal representative of the members, said, "The Urban Maintenance Act stipulates that when selecting or changing a construction company, the decision must be made at the general meeting following procedures such as competitive bidding," adding, "If a specific construction company is being granted the status of construction company without going through such procedures, it is subject to criminal penalties under the law." She also stated, "The association signing contracts with various service companies and executing project funds of tens of billions of won without going through a general meeting is a clear violation of the Urban Maintenance Act."
Association head O said, "I have confirmed the complaint and the petition. I plan to hire a lawyer to respond," adding, "I will determine whether Daewoo E&C is legitimate as a construction company after careful consideration and decide through a general meeting whether to proceed with Daewoo E&C or select a new construction company."
While allegations of illegal borrowing of construction rights and funds have arisen within the association, Daewoo E&C claims to hold the construction rights legally. A Daewoo E&C official stated, "In 2015, when Dongbu Corporation entered court management, the construction contract made between the association and the consortium was terminated, and Daewoo E&C subsequently acquired 100% of the construction rights through a legitimate legal review of Dongbu Corporation's construction equity." He further added, "If it were not the construction company, there would have been no need for lending over 5 billion won."