Prosecutors Summon Former KT CEO Koo Hyun-mo for Alleged Preferential Contracting Investigation

‘Boeun Investment Suspicion’ Also Questioned... Investigation Accelerates on KT Upper Management

The prosecution, investigating allegations of preferential treatment within the KT Group, is accelerating its investigation by summoning former KT CEO Koo Hyun-mo for questioning.

Seoul Central District Prosecutors' Office, Seocho-gu, Seoul. Photo by Jinhyung Kang aymsdream@

According to the legal community on the 3rd, the Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Yong Seong-jin) summoned former CEO Koo on the 1st as a suspect on charges of violating the Fair Trade Act and the Subcontracting Act and conducted an investigation.

The prosecution suspects that former CEO Koo and other KT executives funneled building management contracts to the facility management company KDFS, creating slush funds worth tens of billions of won through this process.

After Koo took office in 2020, the KT Group changed the facility management (FM) contract issuing company from the existing KT Estate to KT Telecop. Consequently, KT Telecop is suspected of concentrating contracts, which were previously divided among four subcontractors?KDFS, KSmate, KFnS, and KSNC?onto KDFS and KSmate. Through this, KDFS's sales reportedly nearly doubled in two years.

Previously indicted KDFS CEO Hwang Wook-jung held key positions within the group during former KT CEO Nam Jung-soo's tenure and, after Koo's appointment, was re-employed at KDFS via KT Telecop, the contract issuing company. The prosecution believes that Koo and other senior group executives formed a kind of 'interest cartel' to systematically funnel contracts to KDFS and installed CEO Hwang to create slush funds worth tens of billions of won from the increased profits.

Additionally, the prosecution is expected to question former CEO Koo regarding the so-called 'favor investment suspicion,' where KT subsidiary KT Cloud allegedly purchased shares of Spark & Associates (Spark, now Open Cloud Lab), a Hyundai Motor affiliate, at an inflated price.

The prosecution is reportedly examining KT's acquisition of Spark alongside Hyundai Motor's acquisition of shares in Airplug. In 2019, Hyundai Motor invested in Airplug, a connected car solution developer. Initially, Hyundai acquired only 16% of the shares, but two years later, in 2021, it purchased nearly all shares for 24.5 billion won.

Airplug was founded in 2010 by CEO Koo Jun-mo, who majored in electronic engineering at Seoul National University and KAIST; Koo Jun-mo is the elder brother of former CEO Koo. Airplug also received investments from venture capital firms Translink and SPK Inc., both established by Park, the founder of Spark. Park is the brother-in-law of Hyundai Motor Chairman Chung Eui-sun.