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Korean prosecutors raid conglomerate in US army bribery probe

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Korean prosecutors raid conglomerate in US army bribery probe

South Korea Business & Finance

Korean prosecutors raid conglomerate in US army bribery probe

SK alleged to have paid American officer $3m to win infrastructure contract for new base

The logo for SK Corp at one of the company's gas stations in Seoul © Bloomberg

South Korean prosecutors have raided the offices of one of the nation’s largest conglomerates amid allegations it offered multimillion-dollar kickbacks to the US Army in exchange for construction contracts.

Dozens of investigators were dispatched to the headquarters of SK Engineering and Construction in downtown Seoul on Friday to confiscate computer hard disks, documents and other material related to construction projects at a new US army base in South Korea’s Pyeongtaek county.

The prosecutors are investigating allegations that the company — an affiliate of the nation’s third-largest conglomerate, SK — gave almost $3m to a US army officer in 2010 to steer a $420m dollar construction contract in its favour.

The officer, Duane Nishiie of the US Army Engineers Corp, was indicted in September in Hawaii on charges including bribery, wire fraud and money laundering related to the case. Lee Seung-ju, a former officer in the procurement department of Seoul’s defence ministry, was indicted on the same charges.

SK Engineering and Construction declined to comment. US Forces Korea was not immediately available to comment.

“The raid was needed to look into the bribery claims linked to a US military contract,” the prosecutor in charge of the investigation told the Financial Times. 

The US military maintains close to 30,000 personnel in South Korea to defend against the threat from North Korea. For decades, the forces were centralised in a vast swath of land in central Seoul. However, they are relocating to a new base in Pyeongtaek, 70km south of the capital.

The SK affiliate in 2008 won a $420m contract to build infrastructure for the base as part of the relocation project, which was agreed between Seoul and Washington in 2004. 

The group was first raided by police in 2015 over the claims that it paid kickbacks to Mr Nishiie but the investigation stalled as the officer had already left South Korea. The probe resumed following the indictment of Mr Nishiie, who has pleaded not guilty to the charges. He remains in federal detention in Hawaii.

Prosecutors allege that the SK subsidiary created slush funds through a subcontractor run by Mr Lee, who offered “rebates” on behalf of SK Engineering and Construction to Mr Nishiie in return for winning the US military construction project. 

Mr Lee is in custody in Seoul. 

Mr Nishiie left his job with the Army Engineers Corp in 2012 and began lobbying US defence department officials for construction projects on behalf of the South Korean conglomerate, according to his indictment. 

Prosecutors are now expected to summon SK executives for questioning after scrutinising the seized documents. 

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