Navy loses lawsuit over canceled wedding hall contract; lawmaker warns of W3b in taxpayer losses

The Navy terminated a sole-source contract it had maintained for 12 years — one that funneled 70 percent of wedding hall revenues to a private vendor — and filed criminal charges against the company, only to lose the ensuing lawsuits in succession amid chronic understaffing and poor legal preparation, raising fears of up to 3 billion won ($2.02 million) in taxpayer losses.

According to the office of Rep. Bu Seung-chan, the Navy had for 12 years maintained a sole-source contract allocating 70 percent of net profits from wedding halls at its hotels in Seoul and Jinhae to a specific vendor. After the Board of Audit and Inspection flagged the arrangement in 2024 and the National Assembly raised it again during a national audit in 2025, the Navy terminated the contract and filed charges of fraud and breach of fiduciary duty against the vendor.

The vendors challenged the termination in court, filing both a suit to nullify the termination notice and an injunction to suspend its enforcement. The Navy lost both cases.

The litigation also exposed serious shortcomings in the Navy's legal response team. The Navy had reported that it assembled a dedicated task force of eight people, including the head of its inspection office, but in practice the core work — auditing, investigative coordination and litigation — fell almost entirely to a single lieutenant colonel and one short-term legal officer.

The situation was compounded by the lieutenant colonel responsible for reviewing voluminous financial records being unable to perform normal duties due to a relapse of blood cancer, leaving a single finance sergeant to handle the work in his place.

Organizational support from Navy headquarters has also been absent. A single short-term legal officer on temporary assignment is handling the case alone against an opposing legal team of eight attorneys, yet the Navy headquarters legal office has refused to intervene, saying the matter is for the operating unit to handle on its own.

Even after a court in March granted an injunction filed by the Jinhae wedding hall operator — confirming the need for more personnel — the Navy refused to add staff, citing a precedent of never having assigned two dedicated personnel to such a task.

As a result of these staffing constraints, the Navy has yet to begin the tax investigation referral and financial flow analysis required to recover improperly obtained profits. If the Navy ultimately loses the litigation, it could be required to pay the vendors approximately 3 billion won in damages.

"If 3 billion won in taxpayer money is squandered again because of the Navy's halfhearted response, who exactly will be held accountable?" Bu said. "Unless the Navy leadership actually wants to lose — given the involvement of current and former senior officers — it must mount an all-out, headquarters-level response now."

In response, the Navy said it had immediately begun appeal proceedings after a court on Thursday ruled in favor of the vendor in the first-instance trial of the lawsuit seeking to nullify the contract termination notice for the Navy hotel.