Brilliant rapid growth by buying public housing land
‘Breach of trust under the Special Price Act’ Will the eldest
son
expand into an investigation into the family? hit After being fined by the Fair Trade Commission for bidding on a swarm of bees, there is a prospect that the prosecution will look into the overall succession issue as well as the governance structure. As a result, attention is focused on how Kim Dae-heon, the head of Hoban Group’s planning department (hereinafter referred to as CEO Kim Dae-heon), who is playing the role of the actual leader, will overcome the wave.
According to the construction industry and the legal community on the 21st, Hoban Construction is expected to prepare an application for suspension of execution to suspend the effect along with a lawsuit to the effect of ‘revocation of the FTC’s corrective order and penalty imposition’ immediately after receiving a resolution from the FTC. Previously, the Fair Trade Commission imposed a penalty of 60.8 billion won on charges that Hoban Construction unfairly supported a so-called ‘second-generation company’ in which the eldest son and second son of Chairman Kim Sang-yeol are the largest shareholders.
Hoban Construction is more likely to argue over the act of unfair support itself than the amount of the fine. In other words, it seems that they will focus their response capabilities under the principle of ‘there was no intention to support the second generation’. In addition to the so-called ‘swarm bidding’ in which even non-affiliated partners participate in lottery bids, the Fair Trade Commission took issue with a total of four acts: ▲free rental of bid application money ▲free payment guarantee for PF loans ▲transfer of subcontract contracts. It is highly likely to bet on the fact that it can judge.
An official from Hoban Construction said, “We will be able to start detailed discussions only when the resolution arrives,” but a battle of nerves is already fierce among large law firms to accept the case. An attorney specializing in fair trade cases said, “It is natural to file a lawsuit with the Seoul High Court to revoke the imposition of a penalty surcharge. It will be investigated whether it was an intention to support or an act that was unfair.”
Inside and outside the industry, it is said that it is actually a matter of time for the prosecution to look into the entire ‘corporate governance structure’, including Hoban Group affiliates as well as non-affiliated partners. An official in the construction industry said, “The message that Minister of Land, Infrastructure and Transport Won Hee-ryong posted on Facebook the day after the FTC penalty was imposed, saying ‘I am angry’ made small and medium-sized construction companies tremble with fear.” You will get the feeling that it has been expanded and transferred to the issue of ‘succession’.”
The Fair Trade Commission did not report Hoban Construction to the prosecution in that the statute of limitations (five years) has passed for unfair insider trading. Under the Act on the Aggravated Punishment of the Specific Economy, the statute of limitations for breach of trust in business is up to 15 years (if the gain is over 5 billion won). In addition, since it is an economic crime, the prosecution can directly investigate it. Therefore, once the related investigation begins, there is a possibility that the subject of the investigation will be expanded to the ‘head family’, including Chairman Kim Sang-yeol and CEO Kim Dae-heon, in that it is necessary to examine not only the actual actor who provided unfair support, but also whether there was a purpose for management succession.
According to the FTC investigation, Hoban Construction, which is controlled by Chairman Kim Sang-yeol, is structured to support Hoban Construction Housing and 6 complete subsidiaries owned by the eldest son Kim Dae-heon, and Hoban Industries owned by the second son Kim Min-seong and its 11 complete subsidiaries. In December 2003, Chairman Kim Sang-yeol established Hoban Construction Housing, a company owned 100% by CEO Dae-heon Kim, who was a minor at the time. In particular, CEO Kim Dae-heon secured a 54.7% stake in Hoban Construction when Hoban Construction merged with Hoban Construction Housing in 2018, and the management rights were succeeded.
In this process, the lakeside construction housing grew rapidly through the shifting of the work of the lakeside construction. In December 2003, the founding capital was only 50 million won, but at the end of 2012, the total capital jumped to 184 billion won. This is why people in the industry talk about CEO Kim Dae-heon as the “crown prince.” The share of insider trading also came out close to 100%. In December 2010, Chairman Kim Sang-yeol established Vertium Construction, a company in which 94% of the shares are owned by Managing Director Min-Sung Kim on behalf of Managing Director Min-Sung Kim. A lawyer from a large law firm, who requested anonymity, said, “Governance and succession issues are indispensable,” and “I don’t think the investigative agency will just look at this as an issue of fair trade law.”
In addition, Chairman Sang-yeol Kim was summoned and investigated as a reference in relation to the suspicion of the ‘5 billion club’ by former Rep. Sang-do Kwak. Prosecutors suspect that Hoban Construction, which was in competition with the Seongnam Garden Consortium (participating Hwacheon Daeyu, Hana Bank, etc.), urged Hana Bank to join the Korea Development Bank consortium for the Daejang-dong development project. In addition, in the process of promoting the A2-8 block development project in Wirye New Town, a situation in which Hoban Construction employees received internal information from Seongnam Urban Development Corporation and exchanged inappropriate money and goods was caught, and related investigations are also underway.
In the construction industry, there is a reaction that they expected to some extent about the ‘judicial risk’ surrounding the lakeside construction.
Hoban Construction (then known as Hoban Construction Housing), together with Booyoung, is known as a representative construction company that has grown rapidly since the 2008 financial crisis triggered by the Lehman Brothers crisis. While Booyoung stood out as a rental business housing, Hoban laid the foundation for the company’s growth by purchasing a large number of public housing land at a bargain price. At that time, Jungheung, Chungcheong, Woobang, Dongil, and Woorim also ran a similar growth path with their housing businesses, but what they have in common is that they are ‘private companies’. Since then, Hoban has grown in size, and it is said that he eventually came to think about the issue of ‘hereditary succession of management rights’.
An official in the construction industry said, “At the time, due to the economic downturn, construction companies that owned public housing sites judged that there was no business feasibility and put them up even if they suffered losses. At this time, Hoban bought a lot of public housing land such as Sejong, and after that, in line with the economic recovery, it rapidly enjoyed ‘return profits’.” he explained.
Hoban Construction attracted attention by appearing frequently in the mergers and acquisitions ( M&A ) market. The name was mentioned not only before the acquisition of Kumho Industrial in 2015, but also at the time of the sale of Ssangyong E&C. In addition, it was interpreted that right after the acquisition of Taihan Electric Wire, it was aimed at expanding the business portfolio while paying attention to the acquisition of Doosan Machine Tools. It also succeeded in taking over a media company.
In the industry, since the management succession process of Hoban Construction took place in a relatively short time, they are paying close attention to whether CEO Dae-heon Kim can demonstrate his abilities in overall management as well as judicial risk management. Hoban Construction is regarded as a ‘test bed’ to gauge the fate of other construction companies such as Daebang and Umi who have gone through a similar growth process.
Unlike Chairman Kim Sang-yeol, who was an메이저놀이터 architectural engineer, CEO Kim Dae-heon graduated from Kyunghee University’s Department of Golf Industry and went through a master’s course in business administration. Rather than learning the construction industry through his studies, he has broadened his knowledge in the process of succeeding in management. He was 20 years old when he owned 100% of the shares of Viauto, a real estate sales agency, and he was 23 years old when he joined Lakeside Construction Housing. Afterwards, he went through the executive director of Hoban Construction Future Strategy Office, and at the age of 30 he took on the role of the planning division representative (vice president), and was promoted to the planning division president in 2020.
An official in the construction industry said, “As Hoban Construction is on the road to growth, it has reinforced a large number of manpower, including executives from the construction industry as well as the legal team for several years.” It remains to be seen whether he will go.”