Victim recovery takes a back seat as salaries keep coming... Court orders return of KRW 280 billion

Low Spending of Public-Interest Funds for Taean Oil Spill Relief... Court Says They Were "Used Up on Operating Expenses"

A court has ruled that organizations established to help restore damage from the 2007 oil spill off Taean, South Chungcheong Province, must return more than KRW 280 billion in funds. The court found that the organizations used the money for operating expenses, including salaries for executives and employees, instead of carrying out public-interest projects for which they were established.

According to Yonhap News Agency and legal sources on October 10, the Seoul Central District Court's Civil Division 31, presided over by Judge Nam Insu, recently ruled partly in favor of the plaintiff in a lawsuit filed by the Community Chest of Korea against the West Coast Association Foundation (hereinafter, the "Foundation") and the Hebei Social Cooperative (hereinafter, the "Cooperative"), seeking the return of allocated funds. The court ordered the Foundation to pay the Community Chest of Korea more than KRW 100.1 billion and the Cooperative to pay more than KRW 185 billion.

The Taean oil spill occurred on December 7, 2007, when a crane vessel operated by Samsung Heavy Industries collided with the Chinese-flagged oil tanker Hebei Spirit in waters near Taean County, South Chungcheong Province, spilling 12,547 kiloliters of crude oil. In February 2016, Samsung Heavy Industries reached an agreement with 11 groups representing affected residents to donate KRW 290 billion to the Community Chest of Korea, a legally designated charitable organization, as a regional development fund. That year, the residents' groups established the Foundation and the Cooperative to use the fund for public-interest projects, including revitalizing the local economy.

Residents' groups in Taean County, Seosan City, Seocheon County, and Dangjin City established the Cooperative, while groups in Boryeong City, Sinan County, Yeonggwang County, Hongseong County, Gunsan City, Buan County, and Muan County established the Foundation. The groups received their shares of the regional development fund in November 2018. Around 2021, however, concerns arose in the local community that the two organizations were not properly managing the allocated funds. Audits by the Ministry of Oceans and Fisheries and the Board of Audit and Inspection also uncovered problems, including improper reimbursement of executives' and employees' travel expenses, unnecessary borrowing, and delays in forming a general assembly of delegates. In August 2023, the Community Chest of Korea notified the organizations that it would recover the remaining allocated funds. When the two organizations objected, it filed a civil lawsuit.

The court effectively accepted all of the Community Chest of Korea's arguments.

The court noted that, as of the end of 2021, the Foundation had spent a cumulative total of KRW 4.6 billion, just 4.4% of its total allocation of KRW 104.2 billion, and that KRW 3 billion of this had gone to institutional operating expenses, including executive and employee salaries. The Cooperative had spent a cumulative total of KRW 15.8 billion by the same date, just 7.8% of its total allocation, of which KRW 9.4 billion went to institutional operating expenses.

The court said, "Rather than completing its intended projects within the project period, the Foundation appears to have operated by using income generated from the allocated funds, such as interest, to cover expenses including personnel costs." It added, "Internal divisions rendered the Cooperative's general assembly of delegates unable to function, and serious conflicts both between its headquarters and branches and within the headquarters itself made it impossible to properly carry out the projects." The court also found that the two organizations' project plans were substantially inadequate, concluding that "the Community Chest of Korea's measures to recover the allocated funds were lawful."

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