Sports loans diverted to hotels, hagwon in W38.6b scandal

117 violations found; 13 billion won to be clawed back, some cases referred for investigation

The Ministry of Culture, Sports and Tourism building in Sejong [Ministry of Culture, Sports and Tourism]

Government-backed loans intended to develop the sports industry were diverted to hotels, hagwon and other unrelated businesses in cases totaling at least 10 billion won ($7.3 million), an audit has found.

The Office for Government Policy Coordination's Joint Anti-Corruption Task Force announced Thursday that a joint inspection with the Ministry of Culture, Sports and Tourism had uncovered 117 cases of misuse involving 38.6 billion won in sports industry loans.

The sports industry loan program, run by the Korea Sports Promotion Foundation, provides low-interest financing — at rates of 2 to 3 percent — for the installation or operation of sports facilities. The program disbursed about 260 billion won last year. The inspection examined 600 of the 2,860 loans the foundation issued between 2019 and 2024.

Investigators found 13 cases worth 14.2 billion won in which loans granted for sports facility construction were used for entirely different purposes. Recipients had secured funding under the guise of building sports facilities but spent the money on accommodation facilities, hagwon and other unrelated ventures.

An additional 84 cases totaling 14.1 billion won were flagged as suspected misuse, with borrowers submitting tax invoices unrelated to the loan program or records of personal expenditures as settlement documents.

In 15 cases worth 5.5 billion won, borrowers paid themselves inflated salaries or used the funds to cover rent on their own buildings. In five other cases totaling 4.8 billion won, businesses other than the original loan applicants were operating the facilities without the foundation's approval.

The government said the foundation had failed to verify supporting documents, leaving improper settlement items undetected, and that on-site inspections covered only about 5 percent of all loans. "The foundation's management of the loan program was found to be comprehensively deficient," it said.

Based on the findings, the government plans to recover about 13 billion won from borrowers. Cases involving clearly confirmed illegal conduct, such as the forgery of tax invoices, will be referred for criminal investigation.

Going forward, the government intends to shift loan oversight from banks to direct management by the foundation and to introduce a new set of sports loan disbursement guidelines to clarify spending standards, among other systemic reforms.

yjc@heraldcorp.com