Prosecution Suspects 'Slush Fund Creation'... Indicts for Interfering in Subcontractor Management
Former KT President Yoon Kyung-rim and Others Indicted Without Detention Over 'Boeun Investment Suspicion'
The prosecution investigating KT Group's suspected preferential treatment of affiliated companies has indicted former KT CEO Koo Hyun-mo on charges of interfering with the management of subcontractors, rather than on charges of preferential treatment. They found no charges against former CEO Koo related to the preferential treatment suspicions.
The Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Yong Seong-jin) announced on the 30th that it had concluded no charges against former CEO Koo for violations of the Fair Trade Act.
The prosecution had suspected that after Koo's appointment in 2020, KT Group changed the facility management (FM) subcontracting company to its affiliate KT Telecop and that Koo was involved in funneling work previously divided among four subcontractors, including KDFS, to certain companies, thereby creating slush funds. They conducted an investigation for over a year.
After Koo's appointment in 2020, KT Group changed the FM subcontracting company from KT Estate to KT Telecop. As a result, KT Telecop is suspected of concentrating the work previously divided among four subcontractors?KDFS, KSmate, KFnS, and KSNC?mainly to KDFS and KSmate. It is reported that KDFS's sales nearly doubled in two years through this process.
However, the prosecution found that there was interference in management by instructing KSmate to appoint former executives from affiliates in 2020, which violates the Subcontracting Transactions Fairness Act. Former KT Vice President and Head of Management Division Shin Hyun-ok was indicted without detention along with this charge.
According to the prosecution, former Vice President Shin is accused of conspiring with three current and former KT executives in March 2021 to significantly reduce the transaction volume KT Telecop gave to other subcontractors to funnel more work to KDFS. The three KT executives are also accused of receiving bribes worth tens of millions of won from KDFS CEO Hwang Wook-jung in exchange for increasing FM volume, charges of breach of trust. CEO Hwang was also indicted.
Additionally, the prosecution indicted former KT President Yoon Kyung-rim and former KT Cloud CEO Yoon Dong-sik without detention on charges of breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes, related to the so-called 'favor investment suspicion' where KT subsidiary KT Cloud purchased shares of Spark & Associates (Spark, now Open Cloud Lab), a Hyundai Motor affiliate, at an inflated price.
According to the prosecution, in September 2022, KT Cloud, a KT subsidiary, purchased 100% of Spark's shares for 21.2 billion KRW, above the actual value, causing KT Cloud losses exceeding 5 billion KRW.
The prosecution also indicted former Hyundai AutoEver CEO Seo Jeong-sik without detention on charges of receiving bribes worth approximately 860 million KRW from partner companies along with requests, thereby concluding all investigations related to KT.
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