Umi Group and mid-sized building firm Umi Development, which funneled roughly 500 billion received price of condo building tasks to associates with no monitor report to be able to meet first-priority bidding {qualifications} for public land, will face sanctions from the Honest Commerce Fee.
Firms that acquired help even included a non-affiliated company wholly owned by the second-generation heirs, who disposed of their shares in this non-affiliated firm with 11.7 billion received in inventory sale income in simply 5 years.
Notably, the superb quantity of roughly 50 billion received represents the second-largest superb ever imposed on a building firm.
The Honest Commerce Fee introduced on Nov. 17 that it will impose corrective orders and a superb of 48.379 billion received on company group Umi Group, and criminally report core affiliate Umi Development. This sanction represents a case the place the fee cracked down on unfair help practices that artificially created bidding {qualifications} for particular associates by lending building monitor information to firms with out substantial capabilities. This superb quantity for a building firm ranks because the second-largest in historical past, following Hoban Development (60.8 billion received). Nonetheless, Hoban Development filed a lawsuit in opposition to the Honest Commerce Fee in September 2023 to cancel the superb cost and acquired a partial cancellation ruling.
In calculating the superb, the Honest Commerce Fee thought of the problem of figuring out regular costs and imposed the superb based mostly on enforcement decree requirements, treating 10% of the help quantity because the violation quantity. No mitigation was utilized. Concerning why Umi Development was particularly focused for felony reporting, Choi Jang-gwan, director of the fee’s Company Group Surveillance Bureau, acknowledged, “Umi Development primarily carried out the features of the group headquarters and was the core company that deliberate and directed your entire monitor report funneling construction.”
The fee had beforehand dispatched investigators to Umi Development in February 2024, launching a full-scale investigation. The fee suspected Umi Development of offering unfair help whereas promoting public land to associates by “swarm bidding.” In line with the fee’s investigation, Umi Group created monitor information by inserting associates with no monitor report as non-lead building firms at 12 condo building websites owned by undertaking firms (Umi Development, Umi Improvement, Umi International, and so forth.) ranging from 2017. In line with the fee, Umi Group’s complete help quantity reached 499.7 billion received.
In line with the Honest Commerce Fee, Umi Group had constantly performed swarm bidding utilizing a number of associates since 2010. Nonetheless, the scenario modified when Korea Land & Housing Corp. (LH) considerably strengthened first-priority necessities in 2016 to forestall swarm bidding amid intense social criticism. The system was revised in order that firms with out 300 models of housing building monitor report couldn’t bid as first-priority bidders.
Underneath these circumstances, the Honest Commerce Fee concluded that Umi Group funneled building tasks price 50 billion received to associates with out housing building monitor report ranging from 2017, with the aim of constant to take part in bidding beneath the modified system. Moreover, the investigation revealed that swarm bidding was performed in keeping with group headquarters directives.
Some firms have been even chosen as building firms with out having building enterprise licenses. The 5 firms chosen as help recipients—Umi Property, Myeongga Industrial Improvement, Simwoo Normal Development, Myeongsang Development, and Daan Development—have been primarily paper firms with nearly no gross sales or housing building expertise on the time. Significantly, since these firms lacked precise building capabilities, Umi Group primarily performed systematic meeting by having different associates deal with paid-in capital will increase, technician transfers, web site personnel, course of administration, and contract preparation to assist them meet constructing license necessities. Consequently, these 5 firms, which had nearly no gross sales earlier than help, all emerged as mid-sized building firms with annual gross sales exceeding 50 billion received after receiving help. The Honest Commerce Fee judged this as conduct that significantly distorted market order with competing companies.
A very notable case is Umi Property, which is 100% owned by the second-generation inheritor. Established in 2017 with 1 billion received in capital, this firm was assigned an 88 billion received building undertaking simply 4 months after institution, and based mostly on this, received a further public land plot in 2020. Subsequently, the 2 second-generation heirs offered their shares to Umi Improvement for 12.7 billion received in 2022, realizing 11.7 billion received in income inside 5 years. The Honest Commerce Fee specified this as an unfair switch of wealth to specifically associated individuals. Director Choi acknowledged, “We anticipate the eradication of conduct that artificially offers public land bidding {qualifications} to associates for the aim of collaborating in expedient swarm bidding.”
Moreover, whereas latest swarm bidding circumstances sanctioned by the Honest Commerce Fee involving Hoban, Jeil, Junheung, and Daebang principally concerned firms owned by the founding household, this case is characterised by large-scale help being supplied to associates with out particular relationships past the second-generation inheritor’s firm. The Honest Commerce Fee introduced it should proceed to watch non-public profit extraction and unfair help practices within the housing building and public land markets.
