Political Pressure and Prosecutor Investigation... KT CEO Appointment 'One Mountain After Another'

Yoon Camp's Former Outside Director Candidate Im Seung-tae Withdraws
Prosecutors Intensify Investigation into Embezzlement Charges
Hyundai Motor, Second Largest Shareholder, Also Says "Major Shareholder Opinions Must Be Reflected"

Political circles and investigative authorities are intensifying pressure on Yoon Kyung-rim, president of KT Group's Transformation Division, who has been nominated as the next CEO of KT. A candidate for outside director from Yoon Seok-yeol's presidential campaign, endorsed by the company, suddenly withdrew, and the prosecution has launched a full-scale investigation into various allegations surrounding President Yoon, including breach of trust. Moreover, even Hyundai Motor Group, the second-largest shareholder previously considered an ally, has completely turned against Yoon by issuing a warning message regarding his appointment as CEO.

According to industry sources on the 10th, Im Seung-tae, a legal advisor at the law firm Hwawoo and a candidate for KT outside director, tendered his resignation that morning, just two days after being nominated. It is reported that Im, who was appointed as CEO of KDB Life Insurance, made the decision to focus on his new role.

However, some interpret this as due to the burden from the growing veto atmosphere against President Yoon within the government and ruling party. Im served as a standing economic advisor in Yoon Seok-yeol's presidential campaign during the last election. When KT nominated Im as an outside director, there was speculation that the company intended to present a 'pro-Yoon (pro Yoon Seok-yeol)' figure as a new outside director to act as a bridge between the government, ruling party, and KT.

Regardless of the intention, Im's resignation means KT has lost a politically valuable ally at a time when it is suffering from various external pressures.

Meanwhile, the 'vote battle' expected at the regular shareholders' meeting at the end of this month is also turning unfavorable for President Yoon. Hyundai Motor, another major KT shareholder besides the National Pension Service, recently conveyed to KT's board of directors that the major shareholder's will should be reflected in key agenda items such as the election of CEO or outside directors. This is interpreted as an opposition to Yoon's appointment as CEO. Hyundai Motor Group holds a 7.79% stake in KT (Hyundai Motor 4.69%, Hyundai Mobis 3.1%), making it the second-largest shareholder after the National Pension Service.

Until now, Hyundai Motor was considered a friendly shareholder in the CEO appointment vote battle at this KT regular shareholders' meeting. This was because President Yoon had previously served as an executive vice president at Hyundai Motor, and his role was significant in forging a blood alliance by exchanging shares with Hyundai Motor for future mobility technology cooperation.

However, with Hyundai Motor Group effectively aligning with the National Pension Service, the passage of the CEO appointment agenda at the shareholders' meeting has become uncertain.

Above all, the judicial risk is the most nerve-wracking issue for President Yoon. The Seoul Central District Prosecutors' Office has received a complaint alleging that President Yoon and CEO Koo Hyun-mo funneled affiliate contracts to a specific company, and the case has been assigned to the Fair Trade Investigation Division for a thorough review.

Earlier, the civic group 'Justice People' filed a complaint with the prosecution on the 7th, accusing CEO Koo and President Yoon of funneling KT Telecop's contracts to the facility management company KDFS and providing improper hospitality to outside directors to control the board.

The prosecution is expected to investigate not only the contents of the complaint but also the overall allegations raised against the two individuals. CEO Koo is suspected of being involved with President Yoon in the process of Hyundai Motor acquiring a software venture company for automobiles operated by Koo's elder brother in July 2021.

At that time, President Yoon was serving as an executive vice president at Hyundai Motor. Two months after Hyundai Motor acquired Koo's brother's company for a large sum, Yoon was appointed to a newly created executive position at KT, leading to speculation of a 'favor appointment.'

KT has strongly denied these breach of trust allegations against the two executives. In a statement released that day, KT said, "We have never been involved in allegations that KT Telecop's contracts were funneled to the facility management company KDFS or that slush funds were created and used for lobbying."

KT added, "We outsource building management tasks such as office building facility management, cleaning, and security to KT Telecop, and we have not been involved in selecting management companies or allocating contracts. Both KT and KT Telecop are subject to external audits and internal controls (compliance), making the creation of slush funds fundamentally impossible."

Regarding the suspicion that President Yoon helped acquire Koo's brother's company while serving as an executive vice president at Hyundai Motor, KT explained, "President Yoon joined KT in 2021 as the right person to lead group growth based on his experience working at the three major telecom companies, CJ, and Hyundai Motor. At the time of the acquisition in July 2021, he was not working in or involved with the department responsible for investment decisions."

On allegations that hospitality and entertainment were provided to outside directors to control the board, and that important management documents were deleted as the prosecution investigation approached, KT stated, "These are not true, and we will cooperate sincerely if related investigations proceed."

Regarding suspicions that KT's five hotel businesses incurred losses of up to 30 billion KRW and distributed profits in collusion with some political circles, KT clarified, "KT Group operates four hotels, and even during the unfavorable hotel market environment caused by COVID-19, the annual hotel business losses never reached 30 billion KRW. In fact, the 2022 annual performance was profitable."