Korean energy companies fined by U.S. over bid rigging

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Korean energy companies fined by U.S. over bid rigging

Three South Korean companies agreed to pay a total of $236 million in criminal fines and civil damages for their involvement in a bid-rigging scheme to supply fuel to U.S. military bases in the country, the U.S. government announced on Wednesday.

The South Korean petroleum and refinery companies SK Energy, GS Caltex Corporation and Hanjin Transportation are accused of involvement in a “conspiracy to suppress and eliminate competition” during the bidding process for the fuel contracts, the U.S. Department of Justice said in a press release.

The alleged scheme began at least in or around March 2005 and continued into 2016, it said.

“These charges are the first to be announced in this investigation into bid rigging and price fixing of fuel supply services to the Department of Defense in this critical region,” Assistant Attorney General Makan Delrahim of the department’s antitrust division said in the release. “When a firm cheats the United States by rigging bids, the Division will insist on robust civil settlements like those announced today.”

SK Energy, GS Caltex and Hanjin Transportation have agreed to plead guilty to criminal charges and pay some $82 million in criminal fines, according to the department.

Separately, the firms will also pay some $154 million to the United Sates in a related civil antitrust case.

All three have agreed to cooperate with the ongoing investigations.

“As a result of this conduct, the United States Department of Defense paid substantially more for fuel supply services in South Korea than it would have had SK Energy, GS Caltex and Hanjin competed for the fuel supply contracts,” the release said, without specifying the amount that was paid.

In the same statement, FBI Executive Assistant Director Amy Hess called the alleged rigging “particularly egregious, as they targeted the U.S. military in a critically strategic region, defrauded the U.S. government, and ultimately, cheated the American taxpayers of millions of dollars.”

The U.S. stations some 28,000 troops in South Korea to deter North Korean aggression, a legacy of the 1950-53 Korean War that ended in an armistice, not a peace treaty.

Related to the actions taken by Washington, the companies cited for bid rigging issued formal statements in Seoul on Thursday vowing to follow all rules in the future.

SK Energy offered a “deep apology” for causing trouble, and vowed to strengthen compliance to ensure that such a breach does not happen again.

Hanjin Transportation also said it will put in place a more rigorous compliance system and thoroughly implement it, noting that it “feels responsibility” for not being able to nip the rigging scheme in the bud.

Meanwhile, GS Caltex said it has signed and entered into agreements with the U.S. Department of Justice to conclude the case at hand, but that it could not comment on the specifics, citing the department’s ongoing investigation.

GS Caltex is a 50:50 joint venture between GS Energy and Chevron, the second-largest U.S. oil producer.

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