KTF CEO Cho Arrested on Bribery Charges

Prosecutors investigating the corruption scandal of KTF yesterday arrested the company’s president Cho Young-ju on bribery charges.

Korea’s second-largest mobile phone operator and an affiliate of Korea Telecom has been under fire for allegedly receiving bribes from subcontractors that provide mobile transmission equipment.

Cho was taken into custody at his residence in southern Seoul. Prosecutors will seek an arrest warrant for him as early as today.

Investigators also raided KTF headquarters in southeastern Seoul and confiscated documents on transmission supplies and accounting books from Cho’s and network department offices.

Cho is suspected of receiving 500 million won (438,711 U.S. dollars) in bribes from Chun Young-gon, the real owner of BCNe Global, a transmission subcontractor, in return for giving the company the right to supply the equipment. Cho allegedly took the money through a bank account under the name of his brother-in-law.

Cho took the helm at the mobile service carrier in June 2006.

His brother-in-law is also being grilled, and reportedly introduced subcontractors to Cho.

Chun was also taken into custody on charges of bribery and embezzlement. Also CEO of Knieye Inc., he is suspected of embezzling nine billion won (7.89 million dollars) worth of company funds and bribing former and current executives of KTF including Cho.

BCNe Global was picked as KTF’s subcontractor three months after its inception in Feb. 2006. BCNe Global’s sales grew four times to 35.5 billion last year from 8.6 billion won in 2006.

Along with BCNe Global, investigators raided on Sept. 3 three other subcontractors that allegedly supplied KTF with transmitters worth 130 billion won in 2006, up 2.5 times from the previous year.

The steep rise in supplies has led to the suspicion that Cho colluded with the subcontractors.

Prosecutors have also reportedly found that former and present employees of the mobile carrier amassed slush funds by embezzling company funds and regularly took kickbacks from mobile transmission suppliers.

The raid on BCNe Global in southern Seoul secured hundreds of millions of worth of gift certificates and cash assumed to be reserved for bribes for the Chuseok holidays.

Prosecutors will probe whether the suppliers also bribed KT’s former and current executives and politicians. The investigation is likely to expand to the political circle given that the names of certain politicians close to the heads of subcontractors and KTF are being mentioned.

needjung@donga.com dnsp@donga.com