Text Fwd: Probe Into Foreign Defense Firms Widening

Korea Times
10-06-2009 18:14
Probe Into Foreign Defense Firms Widening:
British Company Becomes Second Target of Investigation After Saab
By Jung Sung-ki
Staff Reporter

An investigation into bribery cases allegedly involving foreign defense firms may widen as more evidence of illegal lobbying activities by foreign companies has emerged, a military source said Tuesday.

The move comes as the Defense Security Command (DSC) is conducting a probe into Saab, a Swedish defense and aerospace company, which is suspected of having offered bribes to the president of an advisory defense think tank at the National Assembly.

During an analysis of materials confiscated from the Security Management Institute (SMI), new evidence has emerged that another foreign defense firm allegedly gave bribes to the institute, the source told The Korea Times, asking not to be named.

He declined to identify the other foreign company concerned, but other sources said it is believed to be a U.K.-based multinational defense manufacturer.

``Investigators are still analyzing confiscated goods and will summon related officials, if necessary,'' the source said.

DSC commander Lt. Gen. Kim Jong-tae said during a parliamentary audit of the administration later Tuesday that his command was investigating six suspects and secured four witnesses.

``Our command began this investigation earlier this year when we secured evidence that classified information on the KF-X program was being leaked to the Swedish firm,'' Kim said. ``Suspects will be summoned from Thursday for questioning.''

Completion of the investigation is scheduled for late this month, he added.

The DSC is probing the case in cooperation with the Seoul Prosecutors' Office and the National Intelligence Service, the source said.

Under the authorization of the prosecution, the command raided Saab's branch office here and SMI headquarters in southern Seoul to seize documents and computer files in a bid to uncover their alleged connection.

Prosecutors traced the bank accounts of officials from Saab and SMI.

The source privy to the investigation said Saab was suspected of having offered 300 million won to 500 million won to the SMI president, a former head of the state-funded Korea Institute for Defense Analyses, to receive classified information on a national fighter development project codenamed KF-X.

Observers say the ongoing intensive probe of major foreign defense companies is in line with President Lee Myung-bak's push to eradicate irregularities in huge arms deals.

In August, Lee was quoted as saying that he believes that about 20 percent of the defense budget could be saved annually if military authorities don't receive ``rebate payments'' in weapons deals.

He called for general defense-spending reductions amid the economic downturn.

Cheong Wa Dae later cut next year's budget proposal submitted by the Ministry of National Defense to a 3.8 percent increase from last year. The ministry had originally proposed a 7.9 percent increase.

``The probe of Saab seems to be the beginning of a wider investigation into illegal lobbying activities by foreign firms and their agencies,'' a defense expert said. ``Depending on the results of the ongoing investigation, many arms acquisition projects, including the KF-X program, could be affected.''

The KF-X project, aimed at creating an indigenous combat aircraft in partnership with a foreign aircraft giant to replace the Air Force's older F-4s and F-5s, has drawn proposals from major Western fighter houses.

Saab has been among the most active bidders by offering a new design for a super-cruising stealth fighter. It also asked South Korea to join its Gripen next-generation program to forge a broader fighter development partnership.

Other foreign manufactures that have shown interest in the KF-X include Boeing, Lockheed Martin and Eurofighter. The KF-X has been controversial, however, since many defense analysts see it as unviable economically and technically.

The Weapon Systems Concept Development and Application Research Center of Konkuk University commissioned by the government to examine the feasibility of the KF-X is known to suggest lower operational requirements for the new fighter jet.

In its interim report revealed earlier this year, the center recommended a plan to produce about 250 F-16-class fighters after 2010 with the help of foreign firms.

The center asked foreign firms about their views on the per-plane cost estimate of $50 million, as well as budget-sharing ideas and technology transfer.

In a 2007 feasibility study by a local economic policy think tank, the KF-X project was assessed as unsound economically as it would cost at least $10 billion, but would reap only $3 billion in economic benefits.

gallantjung@koreatimes.co.kr