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KAI chief under probe over slush funds

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  • Published KST
  • Updated KST

By Jung Min-ho

Ha Sung-yong

Korea Aerospace Industries (KAI) President and CEO Ha Sung-yong is under investigation for allegedly creating slush funds.

Sources told the Hankook Ilbo, sister paper of The Korea Times, that prosecutors are looking into allegations that Ha created slush funds through a company, identified as “T.” The company is run by Ha’s friend, Cho.

KAI is suspected of cutting off business with “W,” a company that supplied sensors to KAI for years. It then handed the lucrative contract to T after Cho set the company up in 2014.

Ha and Cho are known to be close, having worked together at Daewoo Heavy Industries & Machinery and Sungdong Shipbuilding & Marine Engineering.

With Ha’s alleged support, T’s revenues soared to 9.2 billion won ($8.1 million) last year from 3.9 billion in 2014.

Investigators suspect that KAI deliberately gave T more money than it had to, and that Cho later returned some to Ha so that he could create the slush funds.

Another KAI subcontractor, run by Ha’s relative, surnamed Son, is also suspected of helping him create slush funds in a similar way.

Prosecutors suspect that Ha, who took the post in May 2013, used some of the dubious funds to win support for his second term. Ha finished his first three-year term last year.

KAI is also blamed for the Surion helicopter, which turned out to have “many safety issues.”

The Board of Audit and Inspection (BAI) has asked the prosecution to investigate Defense Acquisition Program Administration (DAPA) chief Chang Myoung-jin and two other officials for failing to supervise KAI’s development procedure.

The BAI said the helicopter fell short in 29 out of 101 categories in the safety test for winter conditions, conducted in the United State from October 2015 to March 2016.

The BAI ordered DAPA to stop receiving the helicopters until the problems are fixed and to file damage claims against KAI.

For the Surion development project, the government invested nearly 1.3 trillion won over six years. Since KAI, the nation’s sole aircraft manufacturer, completed the project in 2012, 60 Surions have been put in use by the military.

On Friday, prosecutors searched KAI’s headquarters in Sacheon, South Gyeongsang Province, and its Seoul office over allegations that the company inflated product development costs to reap greater profits.