THE QUESTIONABLE AWARDING OF MULTI MILLION DOLLAR AWARD ON LED LIGHTING TO KOREAN FIRM ENGULFED IN CONTROVERSY

The Korean media have reported extensively on the controversy engulfing the telecom giant KT – with allegations of slush funds being used not only in Korea but internationally too. It is to this same company that the Government of Sri Lanka are attempting to award a multi-million dollar contract on street lighting – to a company whose primary business is that of a telecom operator.

 

Excerpts from various articles in the Korean media:

 

KT chairman faces arrest over illegal political funding

Police sought an arrest warrant for the head of South Korea’s major mobile carrier KT Corp. and three others on Monday for alleged involvement in the firm’s illegal donations to lawmakers.

Seven former and incumbent KT executives, including Hwang, have been booked on charges of embezzlement and violation of laws related to political funding. Of them, police are seeking arrest warrants for four, the National Police Agency said in a briefing.

They are suspected of creating 1.15 billion won ($1.04 million) in slush funds from May 2014 to October 2017 and of spending 442 million won of the money for illegal donations to 99 lawmakers.

Police questioned Hwang over the allegations in April. They suspect Hwang either instructed them to do so or was briefed about it. He has denied the charges.

Political fund law bans a registered firm or group from donating any funds to lawmakers. Donations made with company money are also forbidden.

Police believe that the donations were given to lawmakers who belonged to the parliamentary committee in charge of telecommunications in return for legislation and policies favorable to Internet-only banking services, KT’s newest business.

Hwang took the helm of the mobile carrier in 2014 and renewed his term for another three years last year. The former Samsung Electronics executive is best known for his pioneering work in the development of memory chips.

Ex-KT chairman faces arrest over alleged hiring

Lee Suk-chae, former chairman of telecom firm KT Corp., appeared before a local court Tuesday morning to attend an arrest warrant hearing in connection with allegations that he gave preferential treatment in hiring to a high-profile opposition lawmaker’s daughter.

Lee, who served as KT chairman from 2009 to 2013, is suspected of involvement in giving preferential treatment to job applicants with ties to powerful figures — including a daughter of Rep. Kim Sung-tae of the then-ruling Liberty Party Korea — in the recruitment process at the telecom giant.

Lee, who is charged with obstruction of business, faced questions as he entered the Seoul Southern District Court in the morning but would not say whether he ordered the illicit hiring or whether Kim, a former floor leader of the main opposition Liberty Korea Party, had asked for a favor.

There were nine cases of hiring irregularities at KT in 2012, according to the prosecution.
Lee reportedly denied any involvement. He was called in twice for questioning by prosecutors.
Earlier this month, the prosecution sent those who were in charge of the recruitment process at KT in 2012 — Seo Yu-yeol, a former KT president, and Kim Sang-hyo, a former KT executive in charge of personnel affairs — to trial on charges of misusing their authority to hire six people, including the lawmaker’s daughter, to fill full-time positions at KT.

 

SEOUL POLICE FILES WARRANT FOR KT CHAIRMAN’S ARREST

South Korean police on Monday filed an arrest warrant for KT Corp. Chairman Hwang Chang-gyu and three other former and incumbent employees for their alleged involvement in providing illicit political donations to lawmakers from 2014 to 2017.

The Seoul Metropolitan Police Agency said on Monday that it requested a warrant to arrest four former and incumbent KT employees including its chairman Hwang as they are suspected of having used 441.9 million won ($399,477) worth of company funds to provide illegal political donations to 99 legislators of the 19th and 20th National Assembly between May 2014 and October last year.

It is the first time for the police to file an arrest warrant for an incumbent KT CEO since the country’s leading mobile carrier was privatized in 2002. The request comes after the police questioned Hwang on the suspicious donations in April.

The latest development has come as a surprise to KT employees at a time when the company is busy in readying to commercialize the fifth-generation (5G) wireless network by next year and win the frequency auction of the country’s first 5G network contested by rivals SK Telecom Co. and LG UPlus Corp.

KT said in a statement that its CEO has not given any directions with regard to the latest development. The company said that it will cooperate with the investigators.

If KT Chairman Hwang is arrested, the mobile carrier will face a leadership vacuum, dealing a major blow to its future growth businesses such as those involving 5G network, industry observers said. It is also happening at a critical moment when the company needs to establish new strategies ahead of the abolition of the country’s pay TV operator regulation that bans the market share of a single operator from exceeding 33.3 percent.

Considering it, industry sources from the conglomerate circle predicted that Hwang may voluntarily resign, just like former Posco Chairman Kwon Oh-joon who offered to step down in April after being given a second term amid allegations over Posco’s involvement in the nationwide state affairs meddling scandal that ousted former President Park Geun-hye from office. KT Chairman Hwang, however, has been actively involved in management and dismissed the possibility of him stepping down.

It is not new for a CEO of KT, which was once a state-owned telecommunications company, to step down after a new administration enters office. Former KT CEOs who were successfully appointed to serve second terms had never completed their second term due to prosecutors’ investigation with the launch of the new government. Former CEO Lee Suk-chae voluntarily resigned in November 2013, almost two years after he began serving his second term and ahead of prosecutorial questioning. Former CEO Nam Joong-soo also resigned in November 2008 after serving eight months on his second term as he was arrested over allegations over a bribery scandal.

 

LEE SUK-CHAE FMR CHAIRMAN, KT ARRESTED

 

SEOUL, April 30 (Yonhap) — Lee Suk-chae, former chairman of KT Corp., was arrested Tuesday over his suspected involvement in a hiring scandal at the telecom giant.

The Seoul Southern District Court issued an arrest warrant for the 74-year-old Lee after holding a hearing Tuesday to review the legality of pretrial detention for him.

The court said the arrest warrant was issued due to concerns of destruction of evidence.

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Former KT Chairman Lee Suk-chae (Yonhap)

 

Lee, who served as KT chairman from 2009 to 2013, is suspected of being involved in nine cases of hiring irregularities at KT in 2012.

He is accused of giving instructions to provide preferential treatment to nine job applicants with ties to powerful figures, including the daughter of Rep. Kim Sung-tae, a former floor leader of the main opposition Liberty Korea.

Prosecutors charged Lee with obstruction of business in connection with the alleged hiring irregularities.

Lee, who also served as the information and communication minister before joining KT, has been summoned by prosecutors twice to be grilled about his role in the KT hiring scandal but reportedly denied the charges against him.

In a related development, Seo Yu-yeol, a former KT president, and Kim Sang-hyo, a former KT executive in charge of personnel affairs, were recently arrested and indicted on charges that they gave undue favors to Rep. Kim’s daughter and five other applicants for KT positions in 2012.

Prosecutors suspect that Seo and Kim Sang-hyo gave preferential treatment to some job candidates on an instruction from Lee.

 

SRI LANKA IGNORING DUE PROCESS AND PROCEDURE

Sri Lanka’s cabinet of Ministers originally rejected the awarding of this tender to the proposing contractor who also was bringing in the required funding. Treasury guarantees are usually granted to such funding.

However the thought process of the Cabinet of Ministers was that due to the investment – over USD 400 million – it was best to offer the process to a Swiss Challenge system. That was in 2016 when the Minister in charge was Faizer Mustapha.

It was understood at the time that Mr. Mustapha was steadfast in his refusal to award the project without first ensuring transparency which he had hoped would be achieved through the Swiss Challenge method. That was in 2016.

It lay in abeyance and the funding arrangements fell by the wayside with little progress being displayed by the government. Perhaps the various other issues like drought, flooding, landslides, power shortages and other calamities including a very unstable political structure meant that such forward thinking and energy saving projects were put very much on the back burner.

However after Minister Mustapha left the position in October 2018, the new incoming Minister surprisingly activated the project and without reference to the thinking of the Cabinet of Ministers running up to 2016 and the Swiss Challenge,  awarded the contract to a Korean firm not known as a primary manufacturer of low voltage and low cost lighting for streets.

Many in government rightly felt that despite the futuristic nature of the project the astronomical cost could not be justified at a time when the people found that the cost of living had escalated, the political stability questionable, provincial elections on hold and the coffin in the nail Easter attacks being the final post.

Coupled with all of that the fact that KT themselves are not exactly the paragon of corporate virtue and with little details from the new Minister as to the funding proposal.

Sources close to the story reveal that funding is available via a syndicate of manufacturers in Korea to go ahead with the project at a significantly lower overall cost – but someone somewhere is not paying heed. It was also revealed that no sooner the letter of award was issued, a transfer of USD 4 million was effected and our sources reveal that this money went to a very high ranking officer who is not a politician elected or appointed. The same official has recently stepped out of government office but continues to hold a high office within a state apparatus.

Meanwhile a group of Korean corporates are readying themselves to take legal action via their local Sri Lankan offices.

Former KT Chairman Lee Suk-chae (Yonhap)

 

 

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