South Korean prosecutors raided offices of Korea Aerospace Industries Ltd. (KAI) - the country’s largest defense company and sold aircraft maker - on Friday on allegations on a series of its collusions with the military and corruptions related to defense procurements.

According to the prosecution on Friday, the Seoul Central District Prosecutors’ Office raided the headquarters of KAI in Sacheon, South Gyeongsang, and its office in Seoul amid suspicions that it made illicit gains by overstating the price of some defense equipment and manipulating cost such as development expense. Dozens of investigators were sent to the sites to secure related documents including accounting references as well as digital sources saved on hard drives and mobile phones of related officials.

As the country’s dominant aircraft manufacturer, KAI has been involved in various indigenous defense equipment development projects such as that of Surion, a twin-engine light utility helicopter, and T-50 supersonic trainer jet. Prosecutors are suspecting KAI of profiteering tens of millions of dollars by abusing its monopolistic position and overstating development cost for Surion, T-50, and FA-50.

The latest investigation comes after years of internal probe by the prosecution upon request by the Board of Audit and Inspection (BAI) in 2015 that based on its own inspection charged two KAI employees for taking illegal gains of 24 billion won ($21.1 million) by cooking up developing cost for Surion.

In addition, prosecutors suspect favoritism and bribery. KAI allegedly provided large sums of gift certificates to officials from the military and political circle ahead of the procurement. The prosecution is also expected to look into allegations over embezzlement, suspecting KAI of creating slush funds through foreign exchange profits.

By Lee Hyun-jung

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