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Prosecutors issue indictments over bid-rigging on U.S. military contracts in Korea worth $18M

Published: 09 May. 2025, 16:55

Kim Yong-sik, head of the Fair Trade Investigation Division at the Seoul Central District Prosecutors’ Office, speaks at a press briefing at the prosecution's headquarters in Seocho District, southern Seoul, on May 9. [YONHAP]

Prosecutors have indicted 12 individuals and four companies, including two based in the United States, for allegedly colluding to rig bids on U.S. military contracts in Korea over five years. The scheme, which involved 11 Korean subcontractors and a U.S. bidding agency, is believed to have manipulated contracts worth approximately $17.5 million.

The defendants conspired on 229 bids from January 2019 to November 2023 on subcontracting projects ordered by the U.S. Army Corps of Engineers and the Defense Logistics Agency (DLA), according to the Seoul Central District Prosecutors’ Office on Friday.

Prosecutors indicted nine executives from the Korean firms, three employees of the bidding agency and the corporate entities involved.

Investigators allege that the contractors agreed in advance which company would win each bid. The other firms would then submit inflated quotes to simulate competition, a method commonly known as "cover bidding."

A diagram illustrating how bidding agencies and sub-contractors conspired to win bids . [Seoul Central District Prosecutor's Office]

Prearranged winners and dummy bids

Three subcontractor executives manipulated bids for subcontracting work to maintain U.S. military hospital facilities, according to the prosecutors.

They allegedly submitted fake bids under the names of shell companies, sometimes preparing the false documents themselves. The collusion affected 134 projects, including electrical rewiring and construction work, worth an estimated 8 billion won ($5.7 million).

To deceive inspectors during on-site evaluations, the companies reportedly sent employees from other firms to pose as their own staff. Authorities discovered emails and messages during raids that supported these allegations.

U.S. bidding agency implicated

The bid-rigging extended to 95 additional projects — valued at around 17.5 billion won — issued by the DLA and managed by a Korean branch of a U.S.-based bidding agency. In these bids, which covered procurement and installation work such as LED lighting and CCTV systems at various U.S. military bases in Korea, representatives from one subcontractor and the bidding agency agreed in advance on the designated winner and bid value.

Prosecutors said the bidding agency’s local staff worked with a contractor to prearrange the winners and manipulate pricing. The agency also limited on-site inspections according to dummy bidder lists provided by a subcontractor. In some cases, the bidding agency’s local head allegedly adjusted bid prices to ensure more profitable outcomes for the subcontractor.

Meaningful collaboration

The case marks the first criminal antitrust investigation jointly pursued by U.S. and Korean authorities under a 2020 memorandum of understanding (MOU) between the U.S. Department of Justice and Korea’s prosecution service.

The Justice Department began the investigation in 2022 and indicted several subcontractor executives in March 2024. Korea’s Supreme Prosecutors’ Office received a formal request for cooperation last August and referred the case to the Seoul Central District Prosecutors’ Office, which spent nine months investigating alongside U.S. authorities.

“Cooperation between Korea and the United States in criminal investigations has taken place through formal mutual legal assistance procedures, but this is the first time the U.S. Department of Justice has transferred investigative materials and requested an investigation in Korea,” said Kim Yong-sik, head of the Fair Trade Investigation Division at the Seoul Central District Prosecutors’ Office.

“It is the first case in the four years since the MOU was signed, and the mere fact that a communication channel has been established holds great significance,” he added. “We will continue to maintain strong cross-border cooperation.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM BO-REUM, YANG SU-MIN [[email protected]]