Land development scandal takes center stage in Labor Ministry audit

Ruling party lawmakers on Wednesday raised pressure on the opposition bloc and the son of Rep. Kwak Sang-do for receiving unreasonably large severance pay in relation to a growing land development scandal.

During the annual parliamentary audit of the Ministry of Employment and Labor held Wednesday, lawmakers of the ruling Democratic Party of Korea pressed Labor Minister An Kyung-duk to provide answers on whether the amount Kwak’s son received from his former employer had been reasonable.

The 32-year-old son is reported to have received 5 billion won ($4.2 million) in severance pay in March after working at Hwacheon Daeyu Asset Management as a full-time employee for seven years. The son took home 4.47 billion won after taxes.

The revelation drew controversy as it was reported that Kwak’s son had drawn monthly pay of about 3.8 million won when he left the company and would legally have been entitled to severance pay of about 26.6 million won.

Kim Man-bae, the largest shareholder of Hwacheon Daeyu, had explained the severance pay also included compensation for an industrial accident that he experienced while working for the firm.

“The public understands this case as a bribe or illegally made gift disguised as severance pay,” said Rep. Lim Jong-seong of the ruling party during the audit.

“We need policy changes to prevent any future cases of severance pay used as an excuse to give bribes or illegal funds and avoid taxes.”

Rep. Lee Soo-jin of the ruling party added force to the criticism, alleging that Kwak’s status as a leading lawmaker for the main opposition People Power Party must have played a role in making his son’s severance pay that high.

She pointed out that only 130 million won in compensation had been meted out for a fatal industrial accident involving a 20-year-old contract worker at a thermal power plant in 2018.

The labor minister refused to provide a direct answer on whether the amount of severance pay had been acceptable and in accordance with the law, as his office awaits official paperwork on the matter to arrive from Hwacheon Daeyu. But An acknowledged that the case may be “difficult to comprehend in the eyes of average citizens.”

During the audit, ruling party lawmakers had signs up denouncing Kwak and his son for the severance pay issue, while their counterparts from the People Power Party held up signs asking for Gyeonggi Province Gov. Lee Jae-myung to undergo a special counsel investigation for power abuse.

The case first came to light weeks ago after it was reported that Gov. Lee, the leading presidential candidate for the ruling camp, gave business favors to Hwacheon Daeyu in 2015 to help the firm take part in a land development project in Seongnam’s Daejang-dong when he was mayor of the city.

He is accused of unlawfully aiding Hwacheon Daeyu with capital of 350 million won and gaining more than 400 billion won in dividends. Lee has denied all allegations made against him.

During the Wednesday audit, lawmakers also made inquiries and asked the Labor Ministry to better respond to the struggling local job market.

According to data from the Organization for Economic Cooperation and Development, temporary employment accounted for 26.1 percent of all employment for South Korea in 2020, coming in second among OECD member countries, following only Colombia at 27.3 percent. The proportion of temporary jobs for Korea rose 5.5 percentage points from three years earlier.

Lawmakers criticized the Moon Jae-in administration for only creating short-term jobs during his term to make employment figures look good on the surface. Moon recently commented in a meeting that Korea has been making solid progress on employment even though struggles remain significant.

The audit also inquired into what additional measures are in the pipeline to resolve the Moon administration’s effective failure to keep its promise to halve the annual number of fatal industrial accidents by the end of his term.

According to Labor Ministry data, the number of industrial accident deaths in the first six months of this year reached 474, or 2.6 deaths per day. That is four more than the figure for the same period a year earlier.

Upon taking office in May 2017, Moon pledged to halve the annual figure to about 500, but little has changed. Last year 882 workers were killed on the job, up 27 from the previous year. There were 969 such deaths in 2016 and 964 in 2017.

The National Assembly in January passed a bill to increase employer liability for industrial accidents, but the law comes into effect next year and provides an additional two-year grace period for small businesses with between five and 49 employees.

The audit centered on asking the Labor Ministry to make up for loopholes identified by business and labor circles. Business owners have argued that the law is too ambiguous in defining fatal injuries and conditions for criminal penalization to be imposed on employers in case of accidents.

Labor activists have argued the bill still has loopholes for employers to evade responsibility when industrial accidents occur.

By Ko Jun-tae (ko.juntae@heraldcorp.com)