Prosecutors have launched an investigation into allegations that thousands of government officials working in Sejong City have illegally resold their ownership rights in apartments in the city to earn undue gains.

Investigators have raided six large real estate agencies in the city and seized their transaction files and records. The probe was prompted by a request from the city government, which has confirmed the involvement of realtors in the alleged illegal property deals by public officials.

In 2010, the government came up with a privilege scheme for public officials who had to resettle in Sejong City following the massive relocation of government offices to the administrative center, located about two hours’ drive from Seoul.

Government officials were given price discounts and tax cuts when they purchased apartments to be built in the area.

A total of 9,900 public officials signed up to benefit from the program. But of them, only 6,198 actually moved into their new apartments.

Some of the remaining 3,700 officials have canceled their contracts for some reason, but most of them are believed to have resold their purchasing rights to collect undue capital gains.

Initially, demand for apartments in Sejong City was weak. As there was little possibility of people reselling their purchasing rights to earn profits, the government limited the resale ban to just one year from the contract date.

But it was not long before apartment prices in the city began to rise. Since 2011, the city’s average apartment prices have gained about 10 million won ($8,500) a year. Now some apartments command a premium of about 100 million won.

In 2014, the government belatedly extended the resale ban to three years, as an increasing number of government officials tended to trade their ownership rights to collect the premium. 

Some unscrupulous officials are believed to have resold their purchasing rights even before the resale ban ran out. Under the Housing Act, they face imprisonment for up to three years or a maximum fine of 30 million won.

Many officials who have resold their purchasing rights after the ban ran out are also suspected of having underreported the resale prices in an attempt to lower their tax bills.

The Ministry of Land, Infrastructure and Transport has found that the property transactions that took place in Sejong City in the first three months of the year included 149 cases where the reported values of the properties were much lower than those of similar ones in the neighborhood, suggesting that the owners juggled with the figures

The ongoing investigation into public officials in Sejong City lets us down as it illustrates the low ethical standard of Korea’s civil servants. The government offered them favors to facilitate their early resettlement in the administrative town, but many of them appear to have turned the privilege into an opportunity to earn unwarranted monetary gains.

The government cannot avoid blame for leaving the room for speculative transactions. It should have forced officials to move into their apartments in Sejong City or give up their purchasing rights.

Prosecutors need to investigate the allegations thoroughly. Stern punishments should be meted out to those who were found to have abused their privileges. The probe should provide a time for soul-searching in the entire Korean civil service.