DSME Probed For Allegedly Raising Slush Fund

By Finance

The prosecution is investigating Daewoo Shipbuilding & Marine Engineering (DSME) over allegations it created a slush fund of at least 10 billion won through a subcontractor.

According to prosecutors, DSME received an order in 2007 for the 15,700-ton bulk carrier Mega Trust, from a company called Interex Megaline, an affiliate of Humex Shipping & Air Freight Corp., which was controlled by DSME's then-head Nam Sang-tae's college friend surnamed Cheong.

DSME Probed For Allegedly Raising Slush Fund

Heavy Load Carrier Mega Trust - Image courtesy:  Vladimir Knyaz / Shipspotting

DSME then subcontracted the Mega Trust job to Shinan Heavy Industries (SHICO), which was established in 2005. It was SHICO's first shipbuilding contract.

SHICO built and handed over the bulk carrier to Interex Megaline in December 2008.

Interex Megaline paid DSME 170 billion won ($145 million) for building Mega Trust. Of the total, the prosecution found that Nam allegedly pocketed 10 percent, or 17 billion won, when DSME place the subcontract order.

Of the 17 billion won, prosecutors say they have confirmed that Nam used 10 billion won to create the slush fund.

The prosecution suspects DSME has done this more than once through subcontract orders with SHICO, because the subcontractor won only the one deal in 2007 ― Interex Megaline's Mega Trust deal. But its total contracts skyrocketed to 276.9 billion won in the following year. Most of the deals SHICO clinched in the year were associated with DSME's subcontract orders, the prosecution added.

Some 150 investigators from the Supreme Prosecutors' Office raided not only DSME's headquarters in central Seoul and its shipyard in Okpo on Geoje Island, South Gyeongsang Province, but also Interex Megaline's headquarters as well as Cheong's home.

The prosecution also questioned Cheong and raided the home of Nam's other aid Lee Chang-ha. The 60-year-old renowned architect and former DSME executive was also accused of receiving bribes when DSME built the cruise ship MS Veronica in Oman in 2010.

The prosecution's move is the first of its kind after it set up an anti-corruption unit in January to tackle industry-wide corruption. The shipbuilding and marine engineering sector, which has suffered from snowballing debt amid the economic slump, has become the unit's first target.

Source: Korea Times