POSCO subcontractors raided in slush fund investigation

By Jung Min-ho

Prosecutors raided the offices of three subcontractors of POSCO, Tuesday, as part of an investigation into allegations that the company created a slush fund in Vietnam.

This move came immediately after President Park Geun-hye’s statement at a Cabinet meeting that, “Corruption in every field must be rooted out.”

Seoul Central District Prosecutors’ Office said it had collected internal documents and computer hard disks from the subcontractors in question.

The three were involved in POSCO’s construction projects in Vietnam.

Prosecutors also raided the homes of some of the subcontractors’ executives.

They are looking into whether the subcontractors connived with POSCO to create the slush fund in the Southeast Asian country. Sources said the prosecution has already secured evidence that proves their involvement in the alleged crime.

Some of POSCO’s executives in charge of projects in Southeast Asia allegedly created the slush fund of 10 billion won ($8.9 million) by inflating the costs of building expressways in Vietnam from 2009 to 2012 in collusion with local subcontractors.

Investigators raided the head office of POSCO Engineering & Construction in Songdo, Incheon, and the homes of several executives Friday.

Meanwhile, executive officials of the subsidiary and its audit division have been questioned.

The company said it detected the funds during its own inspection last year and took disciplinary action against those involved, claiming that the money was used as kickbacks to local contractors there.

However, the prosecution is looking into the possibility that the group was systematically involved in the slush fund, and that part of the money was transferred to Korea — which POSCO denies.

There is speculation that the probe may expand to corruption allegations across the group and other companies.

POSCO has also faced allegations that it paid excessively huge sums in merging and acquiring several companies under the leadership of Chung Joon-yang, a close aide to then-President Lee Myung-bak.