Daewoo E&C union to taking legal action against KDB chairman for alleged malpractice

Daewoo E&C labor union is planning to ask the Board of Audit and Inspection to investigate Lee Dong Gull, chairman of Korea Development Bank (KDB), and Lee Dae Hyun, KDB’s investment chief executive officer for possible malpractice.

The union’s request for a probe

The union at Daewoo Engineering & Construction thinks that the said executives had committed offenses when they selected Jungheung Construction as the preferred bidder for the company’s acquisition. Aside from the Board of Audit, the workers are also asking other agencies to check on KDB’s investment decision that was announced on Monday, July 5, The Korea Times reported.

"KDB Investment committed fraud by allowing Jungheung to lower its bid by 200 billion won ($176 million) from the 2.3 trillion won it initially offered after the bidder threatened to drop out unless the seller allowed this," the union said in a statement released Tuesday. "The decision was obvious malpractice."

It was mentioned that Daewoo also refused to reveal the exact price that Jungheung offered and KDB Investment also allowed the buyer to reduce the amount of its bid from ₩2.3 trillion won or $2 billion to just ₩2.1 trillion.

As a result of the drop in the bid, it was reported that a consortium made up of three companies - DS Network, a real estate developer, SkyLake Equity Partners, and IPM, an infrastructure investor, was forced to increase its bid from ₩1.8 trillion to ₩2 trillion. This consortium was picked to be the backup-bidder.

The union is planning to go on strike to protest Jungheung’s acquisition of Daewoo E&C. the group of workers will do what they can to stop Jungheung from conducting due diligence on the construction company.

"Jungheung committed an elementary-level mistake of offering a price which was 500 billion won higher than that its competitor offered, and it disrupted the bidding procedure by threatening the seller," the labor union explained. "It disrupted the fair competition."

KDB’s response to the allegation

The Korea Herald reported earlier this week that KDB Investment selected Jungheung Group as the preferred bidder to buy Daewoo E&C. Apparently, Jungheung outbid the consortium of investors, and this outcome led the union to protest.

Now KDB Investment refuted the allegations hurled by the union. It explained that the final bidders were allowed to modify their bids from the start. The company’s CEO then pointed out that revisions in bidding do not mean a "re-bidding," so there was no malpractice in the process.