Prosecutors raid Daewoo E&C in bribery case

Company suspected of bribing chief arms procurer


Prosecutors on Thursday raided the headquarters of Daewoo Engineering & Construction Co. in central Seoul over allegations that its president handed gift certificates to the state arms acquisition chief last September in return for favors.

Some 10 investigators from the Seoul Eastern District Prosecutors’ Office searched the construction firm at around noon to secure evidence.

Chang Soo-man, commissioner of the Defense Acquisition Program Agency, is suspected of receiving gift certificates worth about 10 million won ($8,940) from Daewoo E&C president Seo Jong-wook.

Chang tendered his resignation Wednesday over his alleged involvement in a separate graft scandal.

Officials from the construction firm told prosecutors that they understood that Seo gave the certificates to Chang, sources said. Both Seo and Chang graduated from the department of economics at Korea University.

Prosecutors note that the company won a construction contract worth 407.8 billion won from the Ministry of National Defense last April.

The contract entitled Daewoo E&C to lead the construction project concerning the relocation of the Special Warfare Command and the third Special Forces Airborne Brigade. At the time, Chang served as vice defense minister.

Daewoo E&C denied the allegations.

“The gift certificates were not in return for any favors. They were just gifts for the Chuseok holiday (Korean Thanksgiving). If it had been given in return for any favors, we wouldn’t have used our company credit card to purchase the gift certificates,” an official at the construction firm said.

The Ministry of National Defense said Chang was not in any position to peddle influence in the bidding process for the construction contract at the time.

Chang is also alleged to have received tens of millions of won from Yu Sang-bong, who was arrested in November 2010 and indicted in December on bribery charges. Chang has so far denied the allegations.

As prosecutors widened their probe into allegations that Yu had bribed dozens of people to secure catering contracts at construction sites, Chang asked a tax attorney to keep the gift certificates.

The tax attorney, surnamed Lee, was recently arrested for professional misconduct. Prosecutors then found that Lee had been keeping the gift certificates in question.

After winning the contracts to run the canteens, Yu sold them to catering firms for a substantial profit. He purportedly bribed dozens of people, including former and incumbent high-ranking government officials, provincial chiefs, public corporation heads and construction firm owners.

Chang took the helm of the state acquisition agency in August 2010. Since then, he carried out a variety of programs to improve export routes for the domestic defense industry.

Along with Kang Man-soo, special presidential secretary for economic affairs, Chang has been regarded as one of the architects of the president’s economic policy, which prioritizes growth, deregulation and market opening.

By Song Sang-ho (sshluck@heraldcorp.com)