Prosecutors Raid Telecom Firm in Rebate Probe

Prosecutors raided the headquarters of KT, South Korea's major fixed-line operator, and the home of its CEO Thursday morning as part of a widening investigation into kickback allegations against its mobile affiliate, KTF, according to Yonhap News.

Scores of investigators confiscated computer hard disks and accounting books at the KT headquarters in Seongnam, south of Seoul, and its Seoul office as well as the residence of Nam Joong-soo, the KT president and formerly head of KTF, prosecutors at the Seoul Central District Prosecutors' Office said.

"Prosecutors decided the allegations (concerning Nam) need to be investigated and ordered the raid," a prosecutor was quoted as saying.

The probe first started at KTF, the country's second-largest handset carrier, and led to the indictment of its former President Cho Young-joo. Prosecutors allege that KTF senior executives had routinely taken kickbacks from subcontractors through borrowed-name bank accounts in return for buying their mobile equipment and routers. Political bribery was initially suspected, but prosecutors said they found no evidence yet.

Cho faced trial for allegedly pocketing 2.4 billion won ($1.8 million) in rebates. Top KTF management officials offered to resign en masse last week.

Based on questioning of subcontractors, prosecutors believe rebates might have also been handed over to Nam, who held KTF's top job for two years until his transfer to KT in 2005.

The probe has dealt a hard blow to KT and KTF, which plan to merge this year. KTF was set to launch ambitious new-generation projects to beat its larger rival, SK Telecom, while KT was preparing to start an Internet Protocol Television (IPTV) service, seen as a potential cash cow to offset its declining fixed-line phone business.