Prosecutors track slush funds of KAI chief

By Lee Min-hyung

The prosecution is widening its investigation into Korea Aerospace Industries (KAI) President and CEO Ha Sung-yong over his alleged slush fund and the firm’s attempt to destroy evidence. Concerns have sprung up over its alleged unfair business practices with subcontractors.

“We have obtained information that the KAI bought an eraser program to delete evidence left on PCs and other electronics devices,” said Lee Dong-yeul, a prosecutor from the Seoul Central District Prosecutor’s Office in charge of the investigation.

The prosecution noted Wednesday the investigation team also found out the data destruction software has been installed on a number of KAI computers.

The prosecution is looking into whether the KAI handed out the program to its employees, in a move to sidestep the prosecution’s intensifying investigation into the company’s multiple corruption allegations.

Ha is particularly suspected of embezzling billions of won from the state-run agency by signing unfair contracts with its subcontractors.

The prosecution speculates he used the slush fund to lobby government officials to extend his presidency. Ha began his three-year term in May 2013. The prosecution alleges he was able to extend his term last year by using the slush fund.

On Friday, the prosecution raided KAI offices in Seoul and Sacheon, South Gyeongsang Province, to obtain evidence over the firm’s multiple corruption allegations. It is also expanding its investigation into five KAI subcontractors over their alleged involvement in the unfair business partnership.

Prosecutors said they are tracing money flows by securing data from the firm’s financial statement.

The KAI is also alleged to have inflated production costs to develop such aerospace defense aircraft as the Surion helicopter and the FA-50 light-weight attack aircraft. The company is particularly suspected of making excessive profits by attracting government investments of 1.3 trillion won ($1.15 billion) for the Surion development.

This is not the first time the KAI has been embroiled in a corruption scandal. In 2015, the Board of Audit and Inspection (BAI) requested the prosecution probe embezzlement allegations involving Ha and a group of KAI officials.

At that time, the prosecution kept a low profile, citing lack of evidence. For this reason, some reports have said this is because the prosecution had been under pressure from the former President Park Geun-hye administration.

The prosecution, however, denied the claim, saying it could not launch an in-depth investigation based on the request alone.

Of note is whether the scandal would negatively affect the KAI’s businesses such as its efforts to export its T-50 supersonic trainer jets.

KAI developed the T-50 in 2001 with technical assistance from the U.S. aerospace giant Lockheed Martin.

About 2 trillion won was invested in the large-scale national project to develop the homegrown supersonic trainer jet that took eight years to develop. The Korean company has also manufactured aerobatic and combat variants, namely the T-50B, TA-50 and FA-50.

The South Korean Air Force has deployed 144 units of the T-50 family, while 16 T-50s were exported to Indonesia in 2011.

KAI officials were not available for comment.