Opposition lawmaker leaves party over son's 5 billion won severance

Kwak Sang-do of the People Power Party has left his party after revelations that his son was paid an extravagant severance of 5 billion won from an asset company responsible for developing real estate in Gyeonggi Province

Rep. Kwak Sang-do holds up a legislative draft that would establish the Corruption Investigation Office for High-ranking Officials that the National Assembly Bills Division had received via fax, saying that its receipt was invalid, in April 2019. (Yonhap News)

A new wrinkle has emerged in the Hwacheon Daeyu scandal after revelations that the son of People Power Party (PPP) lawmaker Kwak Sang-do received a huge severance payout of 5 billion won (US$4.2 million) from the asset management company, which is responsible for real estate development in the Daejang neighborhood of Bundang in Gyeonggi Province.

While allegations had previously centered on development benefits to Gyeonggi Province governor and leading presidential contender Lee Jae-myung, the scandal is now implicating opposition party figures in an alleged buffet of profit sharing.

With additional allegations that Kwak requested that the company hire his son, the lawmaker left the PPP on Sunday.

In a press release the same day, Hwacheon Daeyu said it had “paid approximately 5 billion won in severance and other pay to a certain Mr. Kwak who left our company after working here for seven years [at the deputy department chief level].”

In a Facebook post that day, Kwak’s son wrote that he had “signed a contract in June 2020 with a bonus of 500 million won, including severance pay.”

“Before I left the company in March 2021, the bonus contract was altered so that I would be receiving 5 billion won, and on April 30, 2021, an after-tax payment of approximately 2.8 billion won was received in my account,” he added.

The younger Kwak explained, “I went to work [at Hwacheon Daeyu] around June 2015. Through January 2021, I received a [monthly] salary of 3.83 million won.” This would mean that he received a total of 5 billion won — including severance and bonus payments — after working at the company for around six years.

The amount is over 200 times the 21 million to 22 million won (US$17,800 – US$18,600) he would have been legally entitled to in severance pay.

According to the report from a Hwacheon Daeyu audit posted on the Financial Supervisory Service electronic announcement system, Hwacheon Daeyu had paid a total of 259.03 million won (US$220,000) in severance to employees as of the end of 2020, having been founded in February 2015.

This means that Kwak’s son alone received the equivalent of roughly 20 times the company’s combined severance payments to all employees.

With the payment seeming to defy common sense, legal analysts raised the possibility that Kwak Sang-do may have received the amount as a dividend after investing in Hwacheon Daeyu through a borrowed name.

“No ordinary employee is going to receive 5 billion won in severance,” said an attorney and former chief public prosecutor. “It may be that someone invested under a borrowed name and received a dividend.”

But both Kwaks denied any involvement in investment activities.

In a telephone interview with the Hankyoreh, Kwak Sang-do said he had “never paid any money to or been involved with” Hwacheon Daeyu.

He also went after Lee Jae-myung, insisting that the “problem lay in the making of those kinds of profits,” which he said Lee should “be held responsible for.”

Kwak’s son said, “The claim that my father was behind Hwacheon Daeyu and received payment for that is not true.”

In addition to the severance payment of 5 billion won, allegations also emerged that Kwak requested the hiring of his son.

In his telephone interview with the Hankyoreh, Kwak Sang-do said, “I was having dinner done time with Kim [name redacted] and other [Hwacheon Daeyu majority shareholders], and they talked about how they’d started a company and were looking for employees.”

“I told my son, ‘If you’re interested, give it a go.’ That’s all there was to it,” he said.

When the younger Kwak went to work with Hwacheon Daeyu in June 2015, Kwak was a government employee, serving as chairperson of the Korea Legal Aid Corporation. This suggests that he requested a job for his son while working as a public servant.

The PPP’s consternation at the developments was evident.

Having previously targeted Lee Jae-myung with questions about “who Hwacheon Daeyu belongs to,” the party quickly convened an emergency Supreme Council meeting Sunday afternoon to take disciplinary action against Kwak. But the discussions ended up halted when Kwak gave notice just before the meeting that he was renouncing his affiliation with the party.

Previously on the defensive, both Lee and the Democratic Party launched an attack.

In an emergency press conference, Democratic Party lawmaker Kim Byung-wook, who heads the Daejang task force for Lee’s election camp, demanded that Kwak “come clean about whether the 5 billion won his son received in severance was a reward for an indirect investment, a lobbying payment to stop public land development, or payment for providing political support.”

The Democratic Party let loose with a barrage of criticism, referring to the situation as “PPP-gate” and a case of “daddy pulling strings.”

By Jang Na-rye, staff reporter

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