KAI's deal with Trump's lawyer raises eyebrow

Korea Aerospace Industries (KAI) is facing a risk to its reputation due to its deal with U.S. President Donald Trump's personal lawyer. / Korea Times file

By Yoon Ja-young

Korea Aerospace Industries (KAI), which has been recovering from a corruption scandal involving its former CEO, is facing another risk due to its deal with the U.S. President Donald Trump's longtime personal lawyer. Analysts say it could negatively affect KAI's reputation.

The country's aircraft manufacturer said it paid $150,000 to Essential Consultants, a shell company established by Michael Cohen.

KAI explained it paid the money for his advice on “Cost Accounting Standards,” a bookkeeping rule that it must adopt to make bids in the United States.

“We legally got advice regarding the Cost Accounting Standards through contracts with Essential Consultants,” a KAI spokesman said.

“The payment was based on a legal service contract between the two parties. We are doing our best to abide by the accounting rules that meet global standards,” he added.

However, U.S. media is raising suspicion that Cohen promoted himself as a lobby channel as a close friend of Trump. KAI was not the only company that sent money to Cohen. AT&T reportedly paid more than $200,000 to Essential Consultants to seek “insights into the new administration” and Novartis cited healthcare consulting as the reason.

Essential Consultants and Cohen have been at the center of the scandal involving adult-film star Stormy Daniels. She was paid $130,000 in hush money in October 2016 right before the presidential election in return for not disclosing her alleged affair with the U.S. President.

Her lawyer said that Russian tycoon Viktor Vekselberg, who is close to Russian President Vladimir Putin, sent $500,000 to Cohen's company through investment management firm Columbus Nova between January and August last year. While the lawyer says that the Russian businessman de facto paid Stormy Daniels, Columbus Nova noted the payment was made as consulting fees and had nothing to do with Vekselberg. The Russian telecommunication and energy tycoon is estimated to have $13 billion in assets.

The news reports focus on the fact that KAI has been bidding for a $16 billion deal with the U.S. Air Force. In a joint bid with the U.S.-based defense company Lockheed Martin, it seeks to provide more than 300 training jets to the Air Force.

“Though KAI's contract (with Essential Consultants) was legal, it may negatively affect KAI if it turns into a problem. It is especially so since it is seeking a huge deal,” said Lee Sang-hyun, an analyst at IBK Investment and Securities.

KAI's reputation was already damaged severely by a corruption scandal here a few months before it paid Cohen. Its former CEO Ha Sung-yong and other executives were arrested for alleged embezzlement and fraudulent book cooking. Since inauguration of its current CEO Kim Jo-won last November, the company has been seeking to enhance transparency.