Investigators on Tuesday raided three subcontractors of POSCO Engineering & Construction in Vietnam as part of its widening investigation into the conglomerate’s slush funds.

The suppliers included Busan-based builder Heungwoo and its two affiliates, according to the prosecution. Investigators confiscated computer hard disks, financial statements and other documents at their offices.

Fresh allegations continued after the 10 billion won ($9.9 million) slush fund scandal involving POSCO E&C in Vietnam hit the market last week.
 

Investigators are reportedly looking into additional allegations that POSCO E&C’s parent group POSCO had created a slush fund via its operations at home and abroad as well as its construction unit in Vietnam.

According to insiders at the Prosecutors’ Office on Tuesday, the steel producer is suspected of creating a slush fund of 10 billion won in Indonesia by inflating outsourcing costs during its construction of a steel mill.

It is alleged that the conglomerate signed an exclusive contract with a Korean builder, which has close relations with then-POSCO chairman Chung Joon-yang, who was in office from 2009 to 2014.

The prosecution speculates that about 1 billion won from this amount was handed over to a POSCO senior executive.

In addition, the conglomerate is suspected of rigging the financial statements of some units in the local market in an attempt to secure funds for politicians.

There is widespread speculation that the business group enjoyed close relations with the government of former President Lee Myung-bak, namely the members of a “Yeongpo (Yeongil & Pohang) Line,” a private group of Lee’s closest allies.

The prosecution is reviewing its records after summoning some former and incumbent POSCO executives to determine whether to seek arrest warrants for them. It is also fine-tuning the timing of a summons for ex-head Chung.

Meanwhile, the investigative authority is widening its net and has reportedly launched a low-key investigation into other business groups including SK, Shinsegae and Dongbu over their slush fund allegations.

Like the POSCO case, observers say that the probe could include irregular bookkeeping for embezzlement or tax evasion.

By Kim Yon-se (kys@heraldcorp.com)