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"Quite Serious Offense": IS Dongseo Chairman Kwon Hyuk-woon Receives Final Fine for Violating Farmland Act

[비즈한국] An investigation by Bizhankook has confirmed that Kwon Hyuk-woon, Chairman of IS Dongseo, recently received a final ruling of a 50 million won fine for violating the Farmland Act. Under the Constitution and the Farmland Act, farmland in Korea can only be acquired by those who are farming or intend to farm. Chairman Kwon was indicted on charges of fabricating documents to make it appear as though he intended to engage in actual farming when, in fact, he acquired the land for the purpose of developing a golf course.

According to the legal community, IS Dongseo Chairman Kwon Hyuk-woon was handed a final 50 million won fine on the 27th of last month for violating the Farmland Act. Previously, Chairman Kwon was indicted on charges of obtaining a Farmland Acquisition Qualification Certificate through fraudulent means while acquiring land for a golf course, and was sentenced to a 50 million won fine in October of last year. Although the prosecution appealed on the grounds that the sentence was too light, the second trial dismissed the appeal on the 19th of last month. As the prosecution did not lodge a further appeal, the original sentence was finalized.

Farmland is intended for those who engage in farming. In accordance with the Constitution and the Farmland Act, individuals who do not use or intend to use land for their own agricultural management cannot own farmland. This is the principle of "cultivator ownership." Anyone wishing to acquire land used for crop cultivation or perennial plant cultivation—such as fields, paddies, or orchards—must submit an agricultural management plan to the head of the local government where the land is located and obtain a Farmland Acquisition Qualification Certificate.

The land in question, which sparked the Farmland Act violation charges, is located adjacent to Stonegate CC in Ilgwang-eup, Gijang-gun, Busan. From around June 2015 to October 2020, Chairman Kwon Hyuk-woon purchased 31,850 square meters (38 plots) of farmland in the area for the purpose of building a golf course. Stonegate CC is a public golf course that opened in September 2018. At the time, Ocean D&C, a personal company of Chairman Kwon, constructed the 18-hole course on a 1.2 million square meter site in the area.

Chairman Kwon Hyuk-woon acquired the Farmland Acquisition Qualification Certificates through fraudulent means while buying the land around Stonegate CC. He drafted applications for the certificates as if he intended to use the farmland for agricultural management, despite having no intention of actually doing so. In the applications for the farmland in question, he listed the acquisition purpose as "agricultural management" and stated that he would secure labor through "self-labor" or "hiring" in his agricultural management plan.

In December 2023, the prosecution indicted Chairman Kwon Hyuk-woon for violating the Farmland Act. The basis for the charge was that he had obtained the qualification certificates through deception while acquiring land for the for-profit purpose of building a golf course. According to the Farmland Act, any person who obtains a Farmland Acquisition Qualification Certificate by false or other fraudulent means to own farmland in violation of ownership restrictions is subject to up to five years in prison or a fine of up to 50 million won.

The first-instance court sentenced Chairman Kwon Hyuk-woon to a 50 million won fine last October. The Busan District Court’s Eastern Branch, which oversaw the first trial, stated, "The defendant acquired numerous plots of land for the purpose of building a golf course without any intention of managing the farmland, and obtained fraudulent qualification certificates. This is an act that undermines the legislative intent of the Farmland Act, which seeks to promote management stability for farmers through the efficient use and management of farmland based on the principle of self-cultivation. Given that the land consists of 38 plots totaling 31,850 square meters, the gravity of the crime is by no means light."

The sentencing took into account the transfer of ownership of the land in question. Just before the first-instance ruling in October last year, Chairman Kwon Hyuk-woon invested the land as an in-kind contribution to Groowell, an agricultural corporation. Groowell was established in August 2024 at the Stonegate CC management office for the purpose of corporate agricultural management. Its shares are held by IS Dongseo special related parties (66%) and the affiliate Ilshin Development (34%). The CEO is Bae Ki-moon, head of the IS Dongseo Finance Headquarters, while Chairman Kwon and Goo Ja-keun, head of IS Dongseo’s legal team, serve as internal directors, and Yoo Kyo-sun of the IS Dongseo accounting team serves as auditor.

In delivering the fine, the first-instance court ruled, "Taking into account that the defendant admitted his wrongdoing, has no prior criminal record exceeding a fine, and considering other sentencing factors that appeared during the trial—such as age, character, environment, family relations, motive for the crime, means, consequences, and circumstances after the crime—the sentence is set as ordered."

The prosecution immediately appealed, arguing that the 50 million won fine was too lenient. During the appellate trial, the prosecution argued that the illegal state could not be considered resolved just because Chairman Kwon had transferred the land to an agricultural corporation under his effective control. Since the maximum fine for the violation of the Farmland Act that applied to Chairman Kwon was 50 million won, the appeal was, in effect, a request for a prison sentence.

On the 19th of last month, the second-instance court dismissed the prosecution's appeal regarding the sentence. The 3-3 Criminal Division of the Busan District Court stated, "Considering the size of the land and the method of acquisition, this undermines the spirit of the Farmland Act and the nature of the crime is quite serious. While the defendant argues that he did it to resolve complaints from local farmers regarding the golf course construction, choosing an illegal act to resolve complaints does not justify the crime. Therefore, it is appropriate to punish the defendant strictly."

However, the court added, "If the defendant established the aforementioned agricultural corporation and transferred ownership without any actual intention of engaging in agricultural management, that would constitute a separate violation of the Farmland Act. As the currently available evidence is insufficient to confirm this, the prosecution's argument on this point cannot be accepted," thereby dismissing the prosecution's claim of an inadequate sentence.