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[Newsmaker] LH Corp. could be broken up to prevent recurrence of land purchasing scandal

The LH headquarters building in Jinju, South Gyeongsang Province (Yonhap)
The LH headquarters building in Jinju, South Gyeongsang Province (Yonhap)

The South Korean government has been reviewing whether to turn Korea Land and Housing Corp. into a holding company and spin-off key businesses to prevent further information leaks from the company, sources close to the matter said Friday.

The reports come amid a nationwide crackdown on a massive land speculation scandal centered on LH employees who abused insider information concerning large-scale state funded land development projects.

According to the sources, the Ministry of Economy and Finance the Ministry of Land, Infrastructure and Transport and other related ministries plan to draw up a reform plan for the state housing developer’s spin-off and organization reshuffle. The plan will be then discussed with political parties here.

The sources said that the most viable plan at the moment is to transform LH’s core housing welfare business into a holding company then spin-off its land management and housing businesses into subsidiaries under the holding firm.

The division overseeing state-funded land and housing development, which played a key part in the land speculation scandal, would be split off from LH and taken under the wing of the Land Ministry, under the most plausible scenario, according to the sources.

A massive organizational reshuffle, including downsizing and hiring a compliance officer is reportedly being reviewed as well.

If the reshuffle and the downsizing take place, the process may take years, onlookers said, pointing to LH’s massive workforce of 9,907 employees as of early this year. The number of employees there has increased 49.2 percent since the launch of the Moon Jae-in administration in 2017.

“The aim of the reform bill should be how to prevent information leakage,” Kwon Dae-jung, a real estate professor at Myongji University said.

“When making a holding company and spinning off companies, the government needs to consider the communication channels and the links among them, to draw up an effective plan,” he added.

While the sources and several onlookers have picked the spin-off and holding company option as “most plausible,” the Finance Ministry said that the reports “differ from the LH measures the government has been reviewing and nothing is certain at the moment,” in a statement released Friday.

Finance Minister and Deputy Prime Minister Hong Nam-ki announced Thursday the government would review stricter career restrictions on LH employees after retirement to further rein in abuses of information.

South Korea launched a police-led task force was in March to carry out a nationwide crackdown on the land speculation scandal that has since snowballed beyond LH employees. It has since investigated 2,319 people in 583 cases, including 164 regional government employees, 80 central government officials and 64 LH workers.

By Jung Min-kyung (mkjung@heraldcorp.com)
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