Railway construction corruption is probed

Prosecutors yesterday imposed a travel ban on the chairman of a local railroad construction and parts company on suspicions of bribing high-ranking officials of the state-run railroad construction corporation in charge of awarding contracts.

A travel ban was also slapped on the son of the chairman, who serves as managing director of the corporation, Sampyo E&C.

The move came after prosecutors raided the offices of Sampyo E&C and residences of Chairman Chung Do-won and his son Chung Dae-hyun on May 28.

The investigators obtained bank accounts, business transaction records and Sampyo’s contracts.

Also raided was the office of the Korea Rail Network Authority, the state-run railroad construction and management authority. The Korea Railroad Corporation, or Korail, operates the railway system.

Prosecutors suspect that the public railroad corporation awarded a series of contracts to Sampyo E&C in exchange for the alleged bribes.

The contracts in question were for railroad parts for a new bullet train line to be built with a terminus in Suseo, southern Seoul, and the Honam High Speed Railway.

In the case of the new KTX departing from Suseo, the railway authority awarded Sampyo E&C a 20 billion won ($19.5 million) deal to supply and construct 38 railroad switches without inviting any other bids.

Under law, a public corporation must open a competitive tender if the amount of a deal surpasses 50 million won.

A German company was reportedly planning to bid for that contract. When asked why the authority ruled out the German company, an official of the Korea Rail Network Authority said, “We concluded that the company is inappropriate because their existing switches have some defects.”

Investigators are focusing on management connections between Sampyo and the public company to try to pin down the direction of the bribes.

Shin Kwang-soon, the current vice chairman of Sampyo E&C, once served as president of the Korea Railroad Corporation, the state-run railway operator.

Prosecutors are also investigating allegations that two years ago Chairman Chung and Kim Kwang-jae, who was on the board of the railway authority, had a private meeting. At the time, Sampyo participated in a tender for Honam High Speed Railway.

Sampyo E&C is considered to be a major player in the railroad industry with an 80 percent market share in the railway parts field.

The current probe is part of the government’s efforts to rein in the culture of collusion between public officials and the industries they regulate.

President Park Geun-hye announced a set of sweeping measures last month aimed at fixing problems in the public sector.

Since the sinking of the Sewol ferry on April 16, Park has emphasized rooting out the “bureaucratic mafia,” or “gwanfia,” a term that reflects dubious, decades-old connections between the public and the private sector.

The investigation into the cause of the ferry disaster has revealed cozy relations between shipping regulators and the companies they are supposed to oversee.

The Sewol ferry received good ratings in a safety test conducted earlier this year by the Korean Register of Shipping and the Korea Shipping Association.

BY PARK EUN-JEE, LEE YOO-JEONG [ejpark@joongang.co.kr]