The chairman of Daebang Construction and his son, who were put on trial on charges of providing excessive economic benefits by transferring public housing sites to a family-run affiliate, were acquitted in the first trial.
On the 27th, the Criminal Division 18 Single of the Seoul Central District Court (Presiding Judge Yoon Young-su) acquitted Daebang Construction Co., Chairman Koo Kyo-woon, and his eldest son, CEO Koo Chan-woo, who were indicted on charges of violating the Fair Trade Act.
The issue was whether Daebang Construction's act of reselling public housing sites to affiliates could be seen as unfair support under the Fair Trade Act. Prosecutors said Daebang Construction provided unfair benefits by transferring six public housing sites worth 206.9 billion won to Daebang Industrial Development, which is operated by Chairman Koo's son-in-law, and others from November 2014 to March 2020.
The court first found that the then Fair Trade Act's provision prohibiting the provision of unfair benefits through offering business opportunities could not be applied to Daebang Construction at the time. The court said, "At the time of the resale of public housing sites, Daebang Construction was not designated as a company subject to disclosure," and added, "Offering business opportunities, rather than an asset, falls outside the scope of regulation under the then Fair Trade Act."
It also did not recognize that the resale of public housing sites itself could be seen as unfair support. Citing the fact that the transactions were made at prices close to the public supply price, the court said, "It is also difficult to view this as a transaction on favorable terms." It added, "As for unfair support, the support effect should in principle be assessed based on standards at the time," and concluded, "Even if profits are earned by carrying out a housing development project after the resale, that amounts only to ex post profits."
Prosecutors viewed the public housing sites that Daebang Construction transferred to Daebang Industrial Development and others as land with high development value located in new towns and innovation cities in Seoul and the greater metropolitan area. Daebang Industrial Development developed the public housing sites in question and was found to have posted 1.6 trillion won in sales and 250.1 billion won in operating profit. Its construction capability evaluation ranking also rose from 228th in 2014 to 77th last year.
However, the court found that it could not be concluded that the transaction at the time constituted unfair support solely based on the profits the affiliate earned through development projects after the resale.