Hyosung Group Under Investigation for Alleged Contract Irregularities in Uiwang Baegun Valley Project

The city of Uiwang has been under scrutiny following allegations that the Hyosung Group inflated construction costs for the Uiwang Baegun Valley project, which began after the greenbelt was lifted in 2010. Residents of the new apartments have raised concerns that the contract was awarded through a private agreement rather than a competitive bidding process. Last week, police summoned Lee Sang-woon (73), the vice chairman of Hyosung Group and the project manager at the time, for questioning regarding charges of breach of trust.

The Uiwang Baegun PFV, the project implementation company, selected Hyosung as the contractor for 2,480 new apartment units in September 2015, with a contract valued at approximately 440 billion KRW. Residents claim that the construction costs were inflated when Hyosung was chosen as the contractor. The company reportedly set the construction cost at 3.77 million KRW per pyeong, but is accused of manipulating documents using a basic computer editing program. Initially, Hyosung justified the pricing by referencing a previous contract for an apartment project in Daejeon, claiming the cost was 3.43 million KRW per pyeong, when in fact it was only 3.25 million KRW.

In response to the allegations, Hyosung Group stated that they acquired a 2% stake in the project company three months after signing the contract, asserting that all procedures were conducted legally. They also mentioned that both the Board of Audit and Inspection and the prosecution found no wrongdoing in their investigations.

Lee Sang-woon has been with Hyosung since 1976 and served as the second-in-command under the late Honorary Chairman Cho Seok-rae for 17 years. He became the CEO of Hyosung in 2002 and has also held the position of the 15th President of the Korea Textile Industry Association. Police officials have indicated that they cannot disclose further details regarding Lee's future summons schedule.