[News Focus] Defense industry faces sweeping graft probe

A pan-governmental team investigating corruption in the defense industry is accelerating its probe amid growing criticism that its efforts have yielded lower-than-expected progress despite its repeated vows to root out irregularities in the military procurement process.

The 105-strong team consisting of prosecutors, state auditors, police and taxation officials is currently zeroing in on alleged malpractices involving Ilgwang Gongyeong, one of the country’s largest defense brokers that has engaged in various high-profile state procurement deals.

On Wednesday, the team arrested Lee Kyu-tae, the chairman of Ilgwang Gongyeong, on charges that he inflated the costs of procuring an electronic warfare training system from a Turkish defense firm, Havelsan, and created a slush fund to bankroll its lobbying activities. On Thursday, it arrested a senior official of an affiliate of Lee’s company for complicity in the case. 

Lee is suspected of pocketing some 50 billion won ($44.4 million) by defrauding Seoul’s Defense Acquisition Program Administration. Since 2002, Lee has brokered deals to procure the training system between the DAPA and the foreign firm.

Investigators are also looking into why the government did not demand any compensation from the Turkish firm for the delay in the delivery of the training system. The delivery, which was to be completed by May 2012, had been postponed for about two months.

The government did not ask for compensation in accordance with bilateral contract terms, triggering speculation that the Turkish firm might have been spared of the responsibility to pay the compensation following Lee’s suspected lobbying of officials in the military and the DAPA.

As Lee’s 30-year-old brokerage firm has engaged in many state acquisition projects, the ongoing probe into the firm could reveal more corruptive activities involving former and current government officials. 

It was not the first time that Lee has faced corruption charges. He was arrested on charges of dereliction of duty and embezzlement in 2009 after he worked as a defense broker in the process of purchasing Russian-made weapons.

The acceleration of the probe, launched in November, came amid lingering public distrust over the investigative team.

Critics accused the team of focusing too much on individuals’ alleged corruption rather than directing the probe toward helping to eliminate “structural problems” that have facilitated corruption in the defense industry.

Announcing its interim result of the probe last Sunday, the investigation team said projects involving corruptive activities were worth nearly 200 billion won combined, and that it had indicted 23 people, including five retired generals and five active-duty officials, on corruption charges.

But public criticism rose after it was reported that four of the five indicted active-duty officials were released, while all civilian suspects were still detained.

Critics said the military judicial system was “too lenient” on military suspects, hampering the anticorruption campaign. The military authorities argued that the officials in question were released as they confessed to their corruption. But observers said those who were released could destroy evidence, posing hurdles to the ongoing probe against them.

Meanwhile, Prime Minister Lee Wan-koo vowed to employ a zero-tolerance policy against corruption, calling the ongoing anticorruption campaign a “critical undertaking where the nation’s fate is at stake.”

“Our government will muster up all its capabilities to carry out this historic task to stamp out corruption as we believe that there will be no other chance to push for it if we fail this time,” he said in a statement to the nation. “Whatever cost it may take, we will complete our task to eradicate corruption.”

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