KTF Staff Suspected of Raising Huge Slush Funds

Prosecutors yesterday moved for arraignment of KTF CEO Cho Young-ju as part of the probe into the bribery scandal involving the country’s second-largest wireless carrier.

According to evidence secured by prosecutors, seven to eight KTF officers including Cho received bribes from Jeon Yong-gon, owner of the mobile repeater manufacturer BCNe Global.

Prosecutors stormed KTF headquarters in Seoul Friday and confiscated computer hard drives and records from the offices of suspected officers.

Most of the suspected KTF employees are banned from leaving Korea. They will be soon subpoenaed for questioning.

The suspects are in charge of business areas from networking that supervises repeater supply contracts to accounting and marketing. In addition to bribery charges, authorities are investigating if KTF employees pulled strings in the selection of suppliers or manipulated financial records to raise slush funds.

A prosecutor close to the case said on the condition of anonymity, “We are aiming to find out how much slush funds KTF raised and how it did so,” indicating that structural and customary corruption of KTF is the main target of the investigation.

When Jeon’s K & I International’s Seoul office was raided, prosecutors found memos on KTF officers’ titles and personal characteristics, a list of KTF employees to receive Chuseok holiday gifts and department store gift certificates to be given to them.

Prosecutors also said Cho received 2.5 billion won (2.2 million U.S. dollars) from BCNe Global from 2006 to last year. He reportedly used his brother-in-law’s accounts to receive the bribes, with authorities finding three billion won (2.6 million dollars) going in and out of the accounts.

Cho reportedly received additional bribes from other repeater suppliers, which began to supply huge volumes of repeaters after he took office.

The bank accounts of Cho’s brother-in-law might have also handled bribes from other types of suppliers or business partners related to marketing and construction.

Prosecutors also want to know if KTF employees cooperated with Cho to embezzle company money.

Since Cho stored a large amount of money, authorities say he raised the money not for himself but to bribe politicians or officials.

Speculation has it that KTF must have felt the need to hand out bribes to its mother company KT, or to politicians or officials to take care of some business activities.

Industry insiders say a bigwig under the former Roh Moo-hyun administration is rumored to be a friend of Cho and introduced Jeon to Cho, showing the powerful political connections of repeater suppliers.

The investigation, however, is not yet targeting KT or politicians and officials, prosecutors said.

needjung@donga.com dawn@donga.com