New Power Plasma Faces Ongoing Controversies Including Lawsuits and Defense Corruption Allegations Following Acquisition of Hanguk Fiber

[Asia Economy Reporter Jang Hyowon] New Power Plasma, a KOSDAQ-listed company, has been facing ongoing controversies since acquiring Hankook Fiber last year. Amid ongoing litigation related to the share acquisition, allegations of past defense industry corruption have also surfaced.

According to the legal community on the 23rd, the trial for the cancellation of fraudulent conveyance lawsuit filed by former Hankook Fiber Chairman Jo Yongjun against New Power Plasma began on the 24th of last month.

At the end of last year, New Power Plasma acquired 65.81% of Hankook Fiber’s shares and convertible bonds worth 58 billion KRW from Jo Gyechan and Notics No.2 Private Equity Partnership.

Former Chairman Jo’s side claims that Jo Gyechan, the largest shareholder of the existing Hankook Fiber, and others committed fraudulent conveyance by selling Hankook Fiber shares at a low price without repaying debts. New Power Plasma is also said to have participated in the fraudulent conveyance despite being aware of the situation, and therefore the stock purchase agreement itself should be canceled.

Accordingly, the court issued a provisional injunction in April to prohibit the disposal of Hankook Fiber shares acquired by New Power Plasma.

Furthermore, recent allegations have emerged that Hankook Fiber used abnormal carbon fiber in the production of defense parts.

According to a media outlet, Hankook Fiber, which conducts projects with government agencies such as the Agency for Defense Development and the Defense Acquisition Program Administration, has been purchasing carbon fiber yarn from subcontractor Company N at about four times the international market price since 2012, reportedly misappropriating approximately 8 billion KRW.

Carbon fiber is a strategic material used in weapons manufacturing within the defense sector. Hankook Fiber has participated in numerous projects including short-range surface-to-air guided missiles, the Hyunmoo series missile combustion engines, solid rocket nozzle heat-resistant materials, and the Naro rocket.

This information was disclosed when former Chairman Jo confessed to the prosecution in May last year that he created slush funds by supplying abnormal carbon fiber through Hankook Fiber.

Meanwhile, Hankook Fiber was found to have colluded in bids related to composite materials for government procurement in March, resulting in corrective orders and fines of about 3 billion KRW imposed by the Fair Trade Commission, and sanctions as a dishonest contractor by the Public Procurement Service.