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Supersonic Jet Trainer Maker Caused Loss of The National Treasury

Supersonic Jet Trainer Maker Caused Loss of The National Treasury

Posted June. 18, 2004 22:11,   


Korea Aerospace Industries (KAI), the nation`s sole aircraft producer, is accused of squandering the government budget by having the Ministry of National Defense (MND) and the government spend $110 million (about 132 billion won) in order to gain the rights to deliver the parts of the advanced supersonic trainer aircraft T-50 from Lockheed Martin Aeronautics Co. of the United States.

The Board of Audit and Inspection (BAI) on June 18 revealed an audit report on “The actual conditions on the advanced supersonic jet trainer production.” According to the inspection, BAI asked for a revised contract to rule out $110 million from the expenses which KAI, MND, and the Korean Air Force admitted to having overspent when they signed the contract on the mass-production of the advanced supersonic jet trainer.

At a briefing on the same day, the commissioner of the Government Administration and National Security Audit Bureau, Whang In-kwon, said, “KAI presented a fake report between KAI and Lockheed Martin to the Air Force Aircraft Agency saying if KAI can manufacture main planes in an effort to keep operating the local factories after receiving the main plane production project from Lockheed Martin, it would save $180 million from its original expenses.”

“When the Air Force Aircraft Agency was asked for approving $110 million as government expenses in exchange for Lockheed Martin’s waiver to the right to main plane production, it converted the amount into redemption fee for the investment. In addition, it provided MND with a scheme to exempt from taxes by converting $80 million into marketing expenses,” he added.

It is revealed that MND and the Korean Air Force on December 8 last year remitted $30 million (out of $110 M) from the government budget to Lockheed Martin.

BAI asked for heavy punishment against six (including the former leader of the Air Force Aircraft Agency, air commodore, known as K) who were involved, charging them with providing fake government report and breaching trust and filed criminal prosecution. It also asked for heavy punishment against four people, including a director (known as H) of the audit office in the Defense Ministry, and filed criminal prosecution against three people including the president of KAI, known as K, for the same charge.

Officials from MND argued, “MND approved $110 million from the government budget following KAI’s deep consultation with the Air Force and Lockheed Martin. We don’t think BAI understood the unique character of the defense industry,” saying that they could not accept the result of the audit. MND is going to ask BAI for a retrial.

Young-Hae Choi yhchoi65@donga.com