Arrest warrant on corruption charges sought for big-name defense mogul

Posted on : 2015-07-02 18:31 KST Modified on : 2019-10-19 20:29 KST
Former naval officer Chung Eui-sung reportedly collected brokerage fee of 300 billion won for just one project

A joint government team investigating defense industry corruption requested an arrest warrant for its biggest name yet on charges of weapons brokering irregularities.

The warrant request for Chung Eui-sung, a 76-year-old reserve naval commander who has held a monopoly on submarine acquisition projects, comes seven months after the team was launched last November under chief prosecutor Kim Ki-dong. Chung is reported to have collected a brokerage fee of 300 billion won (US$267 million) on one project alone.

The team made the preliminary arrest warrant request for Chung on July 1, charging him with overseas asset flight according to the Act on the Aggravated Punishment, etc. of Specific Economic Crimes and violation of the Foreign Exchange Transactions Act for allegedly concealing over 100 billion won (US$89 million) in weapons brokerage fees overseas.

Chung is suspected of concealing the amount in Hong Kong and other countries after receiving a brokerage fee of nearly 300 billion won for the navy‘s acquisition of 1,200-ton and 1,500-ton submarines from the German company HDW.

Chung is well known as a major figure on brokering naval weapons transactions. A member of the 17th class at the Korea Naval Academy (joining in 1959), he was later deployed to Vietnam and worked in logistics and procurement before his 1977 discharge. He went on to head the South Korea branch of MTU, a German maker of submarine engines, before entering the field of weapons brokerage in 1983 with his establishment of Haksan Silop, a company named after his home village of Haksan in Gangneung, Gangwon Province.

Having prospered through his associations with the Korea Naval Academy and Germany, Chung also gained notoriety outside the military for his involvement in the Yulgok Project scandal in 1993, in which he received an eighteen-month prison sentence suspended for three years after revelations that he delivered 300 million won to former Navy Chief of Staff Kim Chul-woo to participate in a Korean destroyer development project.

Chung was a figure of major influence, with some claiming he monopolized over 80% of naval weapons brokering. After the Yulgok scandal, he responded with tighter security around himself. Important memos were written by hand rather than on computer, and business discussions were conducted in public bathhouses to avoid recording, sources reported.

But Chung found himself under investigation once again in 2004 in connection with naval appointment irregularities. Military prosecutors claim to have obtained a handwritten “asset list” while conducting a search on Chung’s home. Contents reportedly include the names of banks in several countries - including known tax havens - as well as amounts of cash stored there, which totaled in the hundreds of millions of dollars. In 2006, Chung founded the company UBMTEC to continue his business dealings.

Upon its launch, the investigation team began an internal investigation of Chung, discovering evidence of hidden assets in several countries whose judicial cooperation was subsequently requested.

The team also recently arrested and indicted former naval operations commander and reserve vice admiral Ahn Gi-seok, 64, on charges of influence peddling for his lobbying on Chung’s behalf - a violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. An Oct. 2011 report by Bloomberg noted the possibility that a 39.9 million euro (63 billion won) brokerage fee paid to Chung by MTU’s Asia branch may have been used for bribery, and claimed Chung had invited South Korean military officials to “on-the-job training” at various Asian resorts, where they were entertained and given lavish gifts.

The reports endangered the existing contract, with MTU’s head office commissioning an audit by an accounting firm. In response, Chung allegedly asked Ahn to obtain a document in the name of the naval inspection office chief stating that the on-the-job training “had only positive effects” and “included no other elements,” which was then presented to the Germans.

The investigation also revealed payments totaling 175 million won (US$156,000) to Ahn from Chung as “incentives” and “advisory fees.”


By Jung Hwan-bong, staff reporter


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