Labor ministry arrests contractor over 130 million won in bogus wage-guarantee claims

The labor ministry said Thursday it had arrested an interior-construction contractor accused of orchestrating around 130 million won ($96,964) in fraudulent claims on a state fund that guarantees unpaid wages, along with an attempt to collect roughly 60 million won more.

The 48-year-old head of the main contractor, identified only by the surname of his company, was arrested under the Wage Claim Guarantee Act, the ministry said. He is accused of conspiring with three subcontractors' heads and an employee to have the government's simplified wage-guarantee payouts made to 28 people between 2022 and 2024.

According to the Incheon Northern District Office of the Ministry of Employment and Labor, the suspect had 21 people paid 69.6 million won ($51,891) and tried to have nine more paid 58.4 million won ($43,552).

Investigators said he drew up false personnel records showing subcontractors' workers as though they were employed by his own company, then had them file false reports of unpaid wages and give false testimony to the labor office. He also obstructed the probe by forging mobile-phone base-station records in response to an investigators' request for communications data, the ministry said.

The case came to light after one of his accomplices reported the scheme, and the full picture was established through confessions by the others, bank-account tracing and forensic analysis of KakaoTalk messages, the ministry said.

It said he abused the wage-guarantee system, intended to protect workers left unpaid, to settle construction bills he owed to his subcontractors with the state payouts and to finance personal gambling. The district office said it decided to seek his detention, calling the nature of the offense extremely serious.

He was booked in July 2024 and ignored repeated summonses, prompting a wanted notice. He was arrested at the Wonju Police Station on Tuesday after he had evaded a stakeout. He admitted to all charges during questioning, and the court issued an arrest warrant on Thursday, citing the seriousness of the crime and the risk of evidence destruction or flight.

"The wage-guarantee system supports the livelihood of workers struggling with unpaid wages," Lee Jae-hee, head of the Incheon Northern District Office, said. "Abusing it obstructs the sound operation of the wage-claim guarantee fund and adds to the burden on well-meaning employers who faithfully pay their contributions, harming the public interest."

Lee also warned that the office will treat deliberate fraud as grounds for detention and will recover the full amount taken, and will consider additional charges of up to five times the fraudulently claimed sum, along with criminal and civil measures carrying up to three years in prison or a fine of up to 30 million won ($22,376).