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Prosecution Investigates Daewoo International Raising Slush Fund
Slash Fund Investigation
Prosecution Investigates Daewoo International Raising Slush Fund
  • By matthew
  • November 19, 2013, 07:31
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Daewoo International's new headquarters in Songdo, South Korea.
Daewoo International's new headquarters in Songdo, South Korea.

 

Daewoo International is being investigated for creating a paper company in a tax haven to create a slush fund. 

On November 18, the Foreign Criminal Affairs Department of the Supreme Prosecutor’s Office in Seoul announced that it is “... investigating Daewoo International for creating a paper company to raise a slush fund in the process of pursuing the Korea Coast Guard’s maritime patrol aircraft business.” This 120 billion won (US$113 million) business was related to purchasing 4 CN-235 models from Indonesia to use in EEZ and foreign fishing craft patrol from 2008 to 2010.

The Supreme Prosecutor’s Office believes that Daewoo International established paper company “A” in the purchasing process of the maritime patrol aircraft so that it could pocket some of the brokerage commission as a slush fund. 

The maritime patrol aircraft business was originally a governmental business between Korea and Indonesia, with almost no room for private businesses. However, in this particular business, two private weapon brokers were included. 

In 2007, Korea received an order from Indonesia for three Jangbogo size (1,400 t) Daewoo Ship submarines. In return, Korea imported four CN-235s to use as maritime patrol aircraft. This was what’s called a compromise trade, agreed upon and carried out by both participating governments.

Regarding this, military authorities said, “This type of business never has space for private businesses, and even if it does, it’s merely a formality,” and criticized, “If there were two private brokers included, someone should have suspected something from the very beginning.”

The Supreme Prosecutor’s Office suspects that this newly-established company with a three month history jumped into a governmental contract on the formal pursuit of pocketing a commission. 

The size of this commission is estimated to be billions of won, with some moving into Korea through another paper company, “B,” established in the Virgin Islands. This is according to a May disclosure by “News Tapa,” an independent Internet media presence.

Daewoo International completely denied raising a slush fund, and said, “A is a company established by retired employees of Daewoo, but has no direct relation to Daewoo,” and added, “During the seizure and search in July, they were testifiers.”