The Korea Fair Trade Commission has launched an investigation into Hyundai Engineering & Construction, which is suspected of having shifted the construction costs for a golf facility inside the residence of former President Yoon Suk-yeol onto subcontractors.

According to industry sources on the 12th, the Korea Fair Trade Commission recently conducted an on-site investigation of Hyundai Engineering & Construction over alleged violations of the Fair Transactions in Subcontracting Act. The probe began after a Board of Audit and Inspection audit indicated that Hyundai Engineering & Construction concluded the construction contract at an amount lower than the quoted estimates and shifted the difference to subcontractors.

The case traces back to the construction of an unauthorized golf practice facility inside the presidential residence, led by the Presidential Security Service during the tenure of former President Yoon Suk-yeol. In May 2022, at the direction of then-Presidential Security Service chief Kim Yong-hyun, the service built a 70㎡ golf practice facility at the rear of the presidential residence in Yongsan-gu, Seoul, completing it in August of the same year.

According to the Board of Audit and Inspection findings in January, although Hyundai Engineering & Construction received construction cost estimates of about 259 million won from subcontractors, it entered into a contract with the client, the Presidential Security Service, for a lower amount of 140 million won. In effect, it bid for the job while taking on a loss.

Afterwards, Hyundai Engineering & Construction signed a subcontract worth 127 million won with an interior construction specialist, Company A, then abruptly pressured it to front additional construction costs totaling 317 million won. In the end, Company A, unable to resist the demands from Hyundai Engineering & Construction, entered into sub-subcontracts with three firms and directly paid all of those costs.

In the process, Company A incurred costs far exceeding the original contract amount and ultimately shouldered a loss of 190 million won. As of the time of the audit, Company A had received no separate compensation from Hyundai Engineering & Construction.

Determining that there was a strong likelihood of a violation of the Fair Transactions in Subcontracting Act, the Board of Audit and Inspection requested a related investigation by the Korea Fair Trade Commission. Article 12 of the Fair Transactions in Subcontracting Act prohibits a prime contractor, without just cause, from requiring a subcontractor to provide money, goods, services, or other economic benefits for the contractor itself or a third party.

The allegations surfaced last year. At the confirmation hearing for Korea Fair Trade Commission Chair Joo Byung-gi in September last year, Rep. Park Chan-dae of the Democratic Party of Korea requested a full-scale investigation, stating, “Hyundai Engineering & Construction carried out work first without a formal contract during the presidential residence project and illegally diverted funds from other sites.” At that time, the Korea Fair Trade Commission examined, among other things, whether Hyundai Engineering & Construction had executed written contracts for its subcontracts.

An official at the Korea Fair Trade Commission said, “We cannot confirm specific details of the investigation regarding individual cases.”