[비즈한국] Dohwa Engineering, a firm specializing in civil engineering, has become embroiled in a legal dispute regarding the overseas smart farm business of its subsidiary. The founder and former CEO of the subsidiary has filed a criminal complaint with the police against the CEO of Dohwa Engineering, alleging false and excessive settlement of government policy loans. Dohwa Engineering has dismissed the allegations as one-sided claims by the accuser.
According to the complaint obtained by BizHankook, Mr. C, the founder and former CEO of the agricultural corporation In-Water Solution (IWS), filed a complaint with the Yongin Seobu Police Station on the 24th against Dohwa Engineering CEO Mr. A and executive Mr. B. The complaint requests that CEO Mr. A be charged with fraud under the Act on the Aggravated Punishment of Specific Economic Crimes regarding the settlement of policy loans, and that both Mr. A and Mr. B be charged with forging private documents, uttering forged private documents, and obstruction of bidding in relation to an ODA tender.
IWS is a subsidiary of Dohwa Engineering. It was established in January 2018 as a venture company under the Sungkyunkwan University Technology Holdings. In August 2021, Dohwa Engineering invested 4 billion won in IWS to become its largest shareholder (with a 45% stake). In 2024, it participated in a paid-in capital increase, raising its stake to 69% and incorporating IWS as a subsidiary. In this year's semi-annual report, Dohwa stated that it entered the smart farm business through a stake investment in 2021 and has been participating in the operations of IWS’s local Kyrgyz subsidiary, IWS Agro, since 2023.
Dohwa Engineering received 3 billion won in policy loans from the Korea Rural Community Corporation (KRC) in 2023, earmarked for the second phase of the Kyrgyzstan smart farm project. The company announced plans to invest a total of 4.8 billion won, including 1.8 billion won in self-financing, to construct six new greenhouses and a seedling facility, following the initial first-phase project. Although the original loan execution period was from June 2023 to May 2024, it was extended by six months to November 2024 at Dohwa’s request.
The actual business content differed from the initial plan. The new greenhouses, which were the main component of the second phase, were not built. As the deadline approached in November 2024, Dohwa Engineering reported to the KRC that it had used the project funds for upgrading existing facilities, claiming that "it was more urgent to renovate and improve existing greenhouses than to build new ones." After reviewing the settlement details, the KRC recognized a total expenditure of 3.6524 billion won, including 2.54 billion won of the policy loan. Of the 3 billion won loan, 460 million won was repaid early.
The accuser claims that at least 1.64 billion won of Dohwa Engineering’s settlement amount was falsely or excessively calculated. He argued that at least 1.1 billion won of the approximately 1.92 billion won recognized for existing greenhouse improvements was inflated, and that 300 million won of the strawberry greenhouse improvement costs were also fraudulent. He also alleged that approximately 110 million won in land purchase costs, paid with separate funds rather than the policy loan, and about 130 million won in greenhouse fire recovery costs incurred after the execution period were included in the settlement.
Dohwa Engineering denied the allegations of false or excessive settlement. Dohwa stated, "It is difficult to confirm the specific items and calculations used by the accuser to arrive at the alleged 1.64 billion won," adding, "The renovation and improvement of existing greenhouses and the strawberry greenhouse were actually carried out, and the facts regarding the land and fire-related expenses differ from the accuser's claims."
The company also explained that the changes to the project content were reported to the KRC in stages. A Dohwa official said, "In May 2024, we reported to the KRC that we were downsizing the new greenhouse construction and including the renovation and improvement of existing greenhouses in the project scope," adding, "In November of the same year, we ultimately excluded the new greenhouse construction plan and reported adjustments focusing on existing greenhouse improvements, the seedling facility, and power/LPG supply facilities."
Meanwhile, Dohwa stated that the policy loan amount was subsequently reduced. The company noted, "As a result, the original 3 billion won policy loan was reduced to 1.53 billion won, and all repayment measures based on the final decision of the Korea Rural Community Corporation have been fulfilled, closing the related procedures." In a follow-up call, a Dohwa official explained, "We returned the unused portion of the initial amount and further repaid amounts that did not align with the business plan," adding, "The remainder was recognized as having been used for its intended purpose, so the loan is being maintained."
The accuser also alleged that Dohwa forged a performance certificate for a separate ODA project bid. Dohwa Engineering participated in a bid for an Uzbekistan smart farm project conducted by the Korea Association of Machinery Industry in 2023. At the time, up to 7 points were allocated for quantitative evaluation based on experience in constructing greenhouses of 10,000 square meters or more. The accuser claims that while Dohwa had no such construction experience, it submitted a certificate listing the 12,000-pyeong Kyrgyz greenhouse built by IWS as its own performance record.
Regarding this, Dohwa Engineering explained, "Since we did not have our own construction track record in the smart farm sector at the time, we submitted evidentiary materials regarding 'smart farm investment and development' to have our investment and development participation in the Kyrgyzstan smart farm project recognized as a reference record. As the largest shareholder of IWS, we had invested approximately 4 billion won in the project and were participating in investment and development; the certificate was submitted as data to prove this fact of investment and development participation."