The Korea Herald


Prosecution widening KAI probe to alleged accounting fraud related to fighter jet project

By Yonhap

Published : Sept. 13, 2017 - 18:05

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Prosecutors investigating accounting fraud allegations at South Korea's sole aircraft manufacturer related to a helicopter project are broadening inquiries into new suspicions that the company may also have cooked the books in connection with a mammoth state project to build fighter jets locally, prosecution officials said Wednesday.

The Seoul Central District Prosecutors' Office has been investigating the former chief and other officials at Korea Aerospace Industries Co. over allegations that they gained illicit profits by manipulating expenses in the manufacturing of the utility helicopters known as the Surion.

The prosecutors also suspect KAI inflated the value of the proceeds from the sale of a light attack aircraft, the FA-50, to Iraq, in a deal worth some 3 trillion won ($2.65 billion).

(Yonhap) (Yonhap)

One KAI executive was arrested early this month and another is awaiting a court decision on the prosecution's request for his arrest warrant. 

The prosecutors' office said it uncovered some circumstantial evidence that indicates top officials may have worked together in cooking the books for the 18 trillion won KF-X project, ordered by the government in 2015 to develop Korea's own advanced fighter jets and produce more than 120 planes until 2026.

The prosecution secured documents that suggest its former chief Ha Sung-yong was briefed on the situations, the prosecution said. Ha stepped down soon after the investigation began in July. The prosecution is expected to call in Ha soon for questioning.

KAI has been involved in high-profile defense projects including the Surion, T-50 supersonic trainer jet and others. The fraud allegations were first raised in 2015 when the state auditor's inspection found that KAI pocketed some 24 billion won in illicit profits by manipulating development costs in the Surion project.

According to KAI's financial reports, the company saw its revenue soar 53 percent to 3.1 trillion won from 2013 to 2016. Its operating profit also doubled to 314.9 billion won during the same period.

The government established KAI in the wake of the Asian financial crisis in the late 1990s by combining ailing private defense companies. The government injected about 8 trillion won worth of taxpayer money to salvage the firm. (Yonhap)