Posco probe shifts to its subcontractorsAuthorities investigating an alleged 10 billion won ($8.9 million) slush fund accumulated by Posco Engineering and Construction are now looking into its subcontractors, which are believed to have offered black money as rebates during a construction project.
The Seoul Central District Prosecutors’ Office raided the offices of Posco E&C’s three subcontractors, including Heungwoo Industrial, on Tuesday and is now tracing the flow of their bank funds according to confiscated accounting data.
Heungwoo Industrial expanded its business in Vietnam by establishing Heungwoo Vian in July 2009 and Yongha Vina in January 2010, which mainly provided materials for construction projects.
The prosecution believes Posco E&C, Posco Group’s engineering and construction arm, received a rebate of about 4 billion won - nearly half the 10.7 billion won in Posco’s slush fund - from Heungwoo’s two local companies during a highway construction project in Vietnam from 2009 to 2012.
Heungwoo Industrial, a Busan-based construction company, expanded its business to Vietnam in September 2009 and is believed to have contributed to the slush fund, particularly given its long-term cooperation with Posco E&C.
Posco E&C is an important client for Heungwoo, and orders from the construction arm account for about 16 percent of Heungwoo’s annual sales of 180 billion won.
Heungwoo Industrial became a subcontractor for the predecessor of what is now Posco E&C in 2001 when it won a bid to build a port in Yeongil Bay in Pohang, North Gyeongsang.
Since then, it also obtained large-scale orders from Posco E&C, including construction projects in Sejong City that added up to 479 billion won. It was also responsible for helping to refurbish parts of the Nakdong River in the four-rivers restoration project, a project worth 33 billion won.
Investigators have also focused their attention on possible connections between Heungwoo Industrial and the Lee Myung-bak administration. Additionally, Heungwoo’s CEO is known to have numerous social connections in North and South Gyeongsang.
The prosecution has not ruled out the possibility that its CEO, surnamed Lee, may have been involved in creating Posco’s alleged slush fund.
He is expected to be summoned for questioning after prosecutors finish analyzing confiscated data from Heungwoo.
A Pohang-based construction company was also raided on Tuesday over suspicions that it had corrupt connections to Posco Group’s former chairman Chung Joon-yang, who headed the conglomerate between 2008 and 2014.
During Chung’s term, the Pohang construction company’s annual sales doubled from 50 billion won to 100 billion won as it obtained a multitude of contracts from the corporation. Prosecutors believe the company’s branches in Indonesia and Vietnam also contributed to Posco’s secret fund.
The president of the Pohang-based company is also suspected to be close to former President Lee Myung-bak’s close aides.
BY KIM BONG-MOON [email@example.com]