Posco unit raided over shady plane purchases

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Posco unit raided over shady plane purchases

Prosecutors yesterday confiscated documents and computers from the headquarters of Daewoo International and other weapons brokers following allegations of tax evasion and money laundering during the sale of patrol aircraft by the Coast Guard.

The Seoul Central District Prosecutors’ Office said yesterday it searched the Daewoo International headquarters in Jung District, central Seoul, and at least four other places.

This follows suspicions that Daewoo, a subsidiary of Posco, was involved in setting up an offshore shell company in a tax haven and siphoning off funds to dodge taxes after the purchase of maritime patrol aircraft by the Korean Coast Guard during the Lee Myung-bak administration.

The Prosecutors’ Foreign Criminal Affairs Department and Seoul Main Customs dispatched 43 officials to inspect Daewoo International and the other locations and confiscated financial records, computers and other documents detailing transactions abroad.

According to prosecutors, the Defense Acquisition Program Administration closed a deal to purchase for nearly $100 million four CN235-110s, a medium-range, twin-turbo-prop airplane jointly developed by Indonesia and Spain, for the Korean Coast Guard from Indonesian arms manufacturer PTDi, or PT Dirgantara, in 2008. While the cost of the aircraft was around 130 billion won, additional expenses brought the total price up to 150 billion won.

The Coast Guard brought the planes to Korea starting in May 2011.

Prosecutors said that in cooperation with the National Tax Service they confirmed that a middleman company in the acquisition process set up a so-called paper company in the British Virgin Islands and a portion of the payments went into that account.

A weapons broker based in Mapo District, western Seoul, allegedly laundered rebates awarded in the purchase to an overseas shell company in the Virgin Islands, said prosecutors.

They suspect that over 3.4 billion won may have been laundered in the process.

The company’s office in Mapo as well as the residence of its president, a former director of Daewoo International, were among the places raided yesterday. The president allegedly founded the shell company Contour Pacific Limited in the tax haven in 2005.

BY SARAH KIM, LEE GA-YOUNG [sarahkim@joongang.co.kr]
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