Former POSCO executive arrested


Chung Dong-hwa	Sung Woan-jong

Prosecutors digging deeper into slush fund scandal

By Jung Min-ho

A former executive of POSCO's construction subsidiary has been arrested for helping the firm create a slush fund while implementing engineering projects in Vietnam, prosecutors said Sunday.

The executive, surnamed Park, who headed POSCO E&C's Vietnamese unit from 2009 to 2011, is also suspected of having pocketed 4 billion won ($3.5 million) of the slush fund, estimated at 10 billion won, according to the Seoul Central District Prosecutors' Office.

"We arrested Park on Saturday night," a prosecutor said without giving details.

Last year, POSCO detected his embezzlement during its own inspection and took disciplinary action against him, but failed to report it to police.

The arrest came as the prosecution is expanding its investigation into corruption in overseas business projects.

Prosecutors will summon former POSCO E&C Vice Chairman Chung Dong-hwa and Keangnam Enterprise Chairman Sung Woan-jong for questioning this week.

The prosecution will question Chung about the slush fund, before issuing a summons for former POSCO Chairman Chung Joon-yang, sources said.

POSCO E&C allegedly created the slush fund by inflating the costs of building expressways in Vietnam in collusion with local subcontractors.

The firm claimed that the money was used only as kickbacks to local contractors there. Prosecutors, however, claimed that part of the money was transferred to people here connected to the construction project.

Prosecutors plan to summon ranking POSCO officials who took part in the project.

Meanwhile, Sung will be asked about state funding his company received from 2005 to 2009 for an oil exploration project in Kamchatka in the Russian Far East.

Keangnam received 33 billion won from the state-run Korea National Oil Corp. But prosecutors obtained evidence which indicates that 10 billion won of this was diverted into Sung's family members' bank accounts.

The prosecution is also looking into other energy projects — a development program for a nickel mine in Ambatovy, Madagascar, which Keangnam participated in with the state-run Korea Resources Corp. (KORES) in 2008.

As Keangnam was unable to pay for its investment because of poor financial conditions, KORES paid 17.1 billion won on behalf of the firm. In 2010 when Keangnam withdrew from the project, KORES also bought the company's share of the project at a price higher than that stated in the contract, resulting in losses of 11.6 billion won.

In 2012, the Board of Audit and Inspection identified the losses. It was alleged that KORES accepted the request for the share purchase from Sung because he was close to then-President Lee Myung-bak.

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