Prosecutors summon POSCO E&C executives over alleged slush funds

Prosecutors summon POSCO E&C executives over alleged slush funds. March. 17, 2015 07:19. dnsp@donga.com.

Prosecutors are investigating POSCO Engineering & Construction`s alleged corruption scandal and summoned Monday the company`s two executives and others who reportedly created more than 10 billion won (8.84 million U.S. dollars) in slush funds in Vietnam. The Seoul Central District Court has also found irregularities in the company`s domestic business operations in addition to the Vietnam case, and is examining when to call in former POSCO Chairman Chung Joon-yang and former POSCO E&C Vice Chairman Jeong Dong-hwa for investigation.

Prosecutors are focusing their investigatory power on proving that the former president of POSCO E&C`s Vietnam office and others created a slush fund while conducting capital deals with its supplier for the Vietnam construction project, and offered a rebate to the construction ordering organization with some executives embezzling some of the funds in the process. The prosecution also plans to prove that former Vice Chairman Jeong engaged in various corruptions in domestic operations while in office and whether the secret funds were sent to heavyweights at the Lee Myung-bak administration. When Chung Joon-yang became chairman of POSCO Group in 2009, former National Assembly deputy speaker Lee Sang-deuk and former Knowledge and Economy Vice Minister Park Young-joon had been alleged to have intervened in the chairman`s nomination and also in POSCO`s various M&A projects.

POSCO`s ordeals had continued whenever a new government set in. The late former Honorary Chairman Park Tae-joon was indicted for allegedly receiving bribery one year after he stepped down as chairman in 1992. This happened in the following year after the Kim Young-sam administration set in. POSCO`s next chairman Kim Man-je, who took office in 1994, resigned immediately after the Kim Dae-jung administration was launched, and former Chairman Yoo Sang-boo was also indicted for breach of duty. Former Chairman Lee Ku-taek stepped down in 2009, one year before his official term ended, which coincided with the first year of President Lee Myung-bak in office. POSCO, which was privatized in 2000, currently has no government stake. Due to the absence of a clearly defined "owner," however, disputes have risen constantly over political pressure behind executive nomination and resignation.

Meanwhile, incumbent POSCO Chairman Kwon-Oh-joon expressed his regret for worrying the public and shareholders at a meeting with major executives on Monday. "I will sincerely cooperate with prosecutors` investigation to lift any suspicions, to minimize side-effects on corporate management and to recover trust," he said. "Taking this case as opportunity, we will strictly abide by business guidelines and place priority on business ethics."