Arms dealer charged with US$90 mln fraud

Prosecutors said Tuesday they have indicted the chairman of a major local arms dealer on charges of swindling some 100 billion won ($90 million) from a transaction he brokered between South Korea and a Turkish firm in 2009.

Lee Kyu-tae of Ilgwang Group is accused of exaggerating the price of an electronic warfare training system when South Korea's procurement agency was purchasing it from Havelsan, a Turkish software company.

EWTS trains soldiers on using the electromagnetic spectrum to attack or defend against enemies.

The Seoul Central District Prosecutors' Office said that Lee is believed to have told the Defense Acquisition Procurement Agency that he would use a slush fund he created to finance part of the EWTS production carried out by a local IT services firm.

The task, however, was further outsourced to two of Ilgwang's affiliates, and prosecutors believe that is how the slush fund probably ended up in the hands of Lee and his collaborators.

Prosecutors also allege that the money was used to bribe military or DAPA officials.

The allegations against Lee were first brought forward when South Korea's Air Force realized in 2012 that key parts of the EWTS were dysfunctional.

Corruption has been a nagging problem in South Korea's defense industry. President Park Geun-hye has declared an all-out war against it when the nation's first indigenous salvage ship, the Tongyeong, failed to function during a major ferry disaster last year.

A former head of the Navy has been recently arrested over allegations that he helped a defense firm supply shoddy parts for the 3,500-ton Tongyeong, which the Navy declared defective in 2014. (Yonhap)