SEOUL -- South Korean authorities have arrested 34 people and referred 529 more to prosecution in connection with a land speculation scandal that has infuriated the public in a country where sky-high real estate prices have put housing out of reach for many.
The government on Wednesday announced interim results from a probe into allegations that public employees and officials had purchased land earmarked for development before the plans were announced publicly, profiting from insider information.
The scandal has fueled distrust of President Moon Jae-in's ruling Democratic Party, with potential consequences for next year's presidential race after the party suffered heavy losses in bellwether mayoral elections .
The investigation covered 646 cases and more than 2,800 people, including employees of state-run Korea Land and Housing, local civil servants and their families. Former heads of local governments and lawmakers were among those arrested on corruption and other charges.
"A large number of civil servants ... have been found to have used insider knowledge to purchase lands," said Prime Minister Kim Boo-kyum, who announced the results. Kim apologized to the public for the scandal, saying he felt "extremely embarrassed" about the allegations.
The government says it has seized 90.8 billion won ($81.9 million) in illicit gains from speculative investments. The investigation is still ongoing.
Public employees bought land intended for housing development on the cheap before projects were officially announced. (Photo by Kotaro Hosokawa) The initial scandal, first discovered in March by citizens groups, surrounded an urban development project in the Seoul suburbs that involved building 70,000 new homes. Ten or more employees of Korea Land and Housing, also known as LH, bought land in the area for cheap before the plans were made public, to turn a profit by selling to developers.
Further digging turned up a string of similar deals, and the government set up a special task force to look into past incidents.
Real estate is a sensitive issue in South Korea. Condominium prices have surged 80% in the four years since Moon took office, according to KB Kookmin Bank. The idea of public employees profiting unfairly from the situation, even as a growing number of people are forced out of their homes by rising rents, has stoked public anger.
The scandal contributed to the Democratic Party's losses in April's mayoral elections in Seoul and Busan, the country's two largest cities, and the real estate problem is likely to play a major role in the presidential race as well.
Party chief Song Young-gil apologized Wednesday in a news conference. "The moral hazard of LH employees and the Democratic Party's stance have disappointed much of the public," he said.
"We must seriously reflect on this and regain the people's trust," Song said.