Contractor is nabbed for ripping off the military

The Defense Acquisition Program Administration will fine the nation’s leading defense contractor after it discovered the company overcharged the government by at least 6.67 billion won ($6.1 million).

A DAPA official who asked for anonymity told the JoongAng Ilbo on Wednesday, “It has been discovered that defense company LIG Nex1 had inflated their costs while supplying six items, such as ship-to-ship guided missiles and electronic warfare. They lied about their labor and raw material costs.”

LIG Nex1 is the first company to be caught by a cost-evaluation task force that was launched by the DAPA in January. The source said that in such cases, the government can fine the company “twice the amount that was made” in fraudulent deals.

“The DAPA has demanded the company return 14 billion won,” the official said, which is double the overcharged amount plus tax.

The DAPA is considering additional punishment beyond the 14 billion won and has planned to label LIG Nex1 as an “unjust supplier,” the source said. If the company receives the label, it will be restricted from bidding for jobs for a certain period of time. The DAPA will also inform the Ministry of Knowledge Economy, which registers arms contractors.

“We will place strict restrictions on companies that fabricate the costs of defense equipment, which are paid for with taxpayers’ money,” said the DAPA official. “We will make an accurate verification of the original costs [of the equipment] to manage our annual budget of roughly 10 trillion won transparently and effectively.”

Meanwhile, Noh Dae-lae, commissioner of the DAPA, said at the National Assembly that the administration was considering a plan to swap exports of T-50 fighter jets with the import of stealth fighter jets. The Korean government has a plan to buy 60 stealth fighter jets by the year 2016.

“If we decide on F-35 stealth fighter jets, we should offer T-50 planes as the offset,” Grand National Party Kim Hak-song told Noh.

Noh answered that the DAPA did have such a swap in mind. The F-35 is manufactured in the United States.

The DAPA plans to decide next October on the types of 60 stealth fighter jets and 36 Apache-class attack helicopters it will purchase.

By Jeong Yong-soo, Nam Koong-wook [christine.kim@joongang.co.kr]