Suspicions Rising over Possible KEPCO Slush Fund

Police embarked on an investigation into speculation that the Korea Electric Power Corporation (KEPCO) generated hundreds of millions of won in slush funds by recording inflated expenses for commissioned projects to its affiliates.

In particular, as some of the slush funds allegedly went to an influential politician, the National Intelligence Agency conducted a secret probe of KEPCO officials about how the illegal funds were created.

The police authorities said yesterday, “As the Korea Independent Commission Against Corruption (KICAC) requested we investigate into speculation over KEPCO last month, the Seoul Metropolitan Police Agency is now conducting an investigation.”

According to police, KEPCO allegedly raised up to 600 million won of illegal funds through its affiliates and suppliers by carrying out ERP building projects for personnel, general affairs projects, and management department projects.

KEPCO signed an 800-million won contract with its affiliate KDN to build the ERP system in the aforementioned three departments last April. KDN said that it commissioned the project to a small-sized ERP company, T, for 600 million won, and that KEPCO and T completed the project last December.

However, the KICAC, which investigated suspicions on the case in August, concluded that most of the project overlapped with previous projects, and that the T company did little in the project.

Taking over the investigation from the KICAC, the police are focusing on the possibility that KEPCO’s project was bogus and that KEPCO kept most of the 600 million won paid to T company as its illegal funds.

In response, a KDN official said, “We commissioned the project to T company after deducting 200 million won in labor costs because KEPCO demanded we do so. KEPCO usually asks its commission project affiliates to levy a commission from certain companies.”

A KEPCO official denied the suspicions, saying, “According to the probe by the KICAC, there were some procedural problems in commissioning projects. But there were no other problems. We never demanded re-commissioning fees from other companies, and the talk of slush funds is also outrageous.”

surono@donga.com