Graft concerns lead to raid on Posco

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Graft concerns lead to raid on Posco

Seoul prosecutors raided the Incheon headquarters of Posco’s engineering and construction unit on Friday over suspicions that it created colossal slush funds in Vietnam.

The seizure comes just a day after the new prime minister vowed to eradicate nationwide corruption in his first public statement.

Five prosecutors and around 40 investigators from the Seoul Central District Prosecutors’ Office confiscated documents, account books and computer hard disks from the main office and homes of three executives over allegations that the top steelmaker formed auxiliary funds worth more than 10 billion won ($8.8 million).

The prosecution said the scale of the investigation has been broadened from its initial aim of embezzlement by workers at Posco Engineering and Construction. It will also work to determine whether the illegal funds were siphoned to bribe business partners in other construction deals.

Friday’s raid came nearly a year after the construction arm announced last July after an internal audit that 12 employees were responsible for accumulating slush funds worth 10.7 billion won over the past four years by overstating payments for their subcontractors in Vietnam.

Two executives were removed from their posts and 10 were slapped with disciplinary measures, according to the company. It did not send the case to prosecutors for further scrutiny.

“In our inspection, it was revealed that the funds were entirely siphoned to the locals in Vietnam as rebates,” the company said in a statement on Friday after the news broke, adding that the illegal funds did not make it to Korea.

Earlier on Thursday, newly appointed Prime Minister Lee Wan-koo addressed the country in a widely televised speech, saying he will “do whatever it takes to root out corruption.”

“Since my inauguration, I’ve contemplated what [Korea] must urgently tackle,” Lee said, “and I’ve realized that chronic corruption and lax national discipline, seen in numerous corners of our society, were the greatest barriers to government administration.”

Stressing that he will “concentrate forces” from every part of the government to wipe out irregularities, Lee said each relevant ministry, as well as the prosecution and police, will “push ahead with specially designed countermeasures” for his initiative.

Since the raid on Posco, questions have surfaced over whether the probe on the steelmaker will be just the beginning of a series of investigations into irregularities at national conglomerates.

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