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

[Text fwd]: [Exclusive] Swedish Firm Probed Over Fighter Development Plan

A model of the KF-X fighter jet

Korea Times
A model of the KF-X fighter jet
By Jung Sung-ki
Staff Reporter
10-05-2009 17:51

Saab, a Swedish defense firm, is being investigated here over alleged illegal lobbying of a defense research institute affiliated with the National Assembly regarding a South Korean fighter development program, sources said Monday.

Prosecutors recently raided both the firm's branch office and the headquarters of the Security Management Institute (SMI) in southern Seoul to seize documents and computer files as part of its three-month investigation into their alleged connection, the sources said.

Prosecutors have also traced the bank accounts of Saab officials and the SMI president to uncover alleged financial transactions between the two sides, they said.

SMI has served as an influential research agency regarding major South Korean arms acquisition and development programs since it was established as an advisory agency to the Assembly in 2005.

It was also designated by the Defense Acquisition Program Administration last October as an agency for studying weapons programs, cost analyses and defense technology development plans.

"The prosecution has almost completed its investigation of Saab and SMI and is closely analyzing confiscated material," a source told The Korea Times on condition of anonymity.

"It is a rare and intensive probe into a foreign defense firm and is expected to affect future arms improvement programs involving foreign manufacturers, depending on the results," he said.

Prosecutors said SMI was suspected of having offered classified information on the KF-X indigenous fighter development program to Saab or written up parliamentary documents on the KF-X partnership in favor of the Swedish company, in return for compensation.

A Saab official declined to comment on the issue, while an SMI representative denied the allegation and argued the investigation was merely a routine inspection of the parliamentary advisory institute.

"This incident may deal a blow to Saab in its ongoing and future businesses," the source said, adding the firm is considering cancelling its participation in the Seoul Air Show slated for Oct. 20 to 25.

In a related move, the Defense Security Command investigated the state-funded Agency for Defense Development earlier this year over a possible information leak to Saab, which was conducting a joint feasibility study on key arms development programs.

Saab has engaged in various weapons procurement projects in the country, such as the integration of a naval radar system and the export of its artillery-detecting radar system.

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 KF-X was cut again in next year's defense budget proposals submitted by the Ministry of National Defense earlier this month.

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 have suggested 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