KAI Alleged to Have Hided Corruption to Win US Air Force Contract

A US-based media outlet reported an allegation that Korea Aerospace Industries (KAI) won a project from the US Air Force without properly reporting that the company had been prosecuted for a corruption involving military hardware procurement.

The US media reported on June 19 that two weeks after the prosecution of former and current KAI executives accused by the Korean prosecutors, KAI was awarded a US$48.8 million five-year contract by the US Air Force.

KAI won an F-16 maintenance project from the US Air Force at the end of October 2017. On October 11, 2017, before landing the project, KAI's former and incumbent executives were indicted on charges of window dressing accounting and cost fabrication. So the US media outlet raised a possibility that KAI might have deliberately hidden it.

The media outlet said that it confirmed that the KAI did not notify the US Air Force of the prosecution of its executives and thanks to hiding the fact, KAI passed the US Air Force's business integrity verification process. However, KAI officials confuted that they abided by the US government’s standards and procedures.

Meanwhile, the issue of the KAI executive prosecution has surfaced at a time when KAI is competing with the Boeing-Saab consortium for a 38-trillion-won (US$34 billion) US trainer replacement project to be decided this August. KAI, which has formed a consortium with Lockheed Martin, is concerned that the controversy would negatively affect its consortium.