The Ho Chi Minh City-Long Thanh-Dau Giay Expressway, one of the projects built by South Korea's POSCO Engineering & Construction Co. Photo: Diep Duc Minh
South Korean authorities are investigating alleged slush fund operated by executives of POSCO Engineering & Construction Co. (POSCO E&C) in expressway projects in Vietnam, local media reported.
Chung Joon-yang, POSCO Group’s former chairman, and several former and imcubent executives have been banned from leaving the country since mid-March as investigations are ongoing, the Korea Times reported.
According to prosecutors, some POSCO E&C executives in charge of projects in Vietnam allegedly created slush funds worth 10 billion won (US$8.9 million) by inflating the costs of building ODA-funded expressways in Vietnam from 2009 to 2012 in collusion with local subcontractors.
The company said it had detected the funds during its own inspection earlier and took disciplinary action against those involved, saying the money was used as kickbacks to contractors there.
However, prosecutors are looking into the possibility that the group was involved in the slush fund systematically and that part of the money was transferred back to South Korea, which POSCO denies.
On March 26, an executive surnamed Park, who headed POSCO E&C’s Vietnamese unit from 2009 to 2011, was arrested for allegedly pocketing 4 billion won ($3.5 million) of the slush fund, according to the Seoul Central District Prosecutors’ Office.
Prosecutors are also looking into the alleged involvement of three subcontractors of POSCO E&C, including Heungwoo Industrial, in the establishment of the slush fund.
Heungwoo was a major business partner of POSCO E&C in the latter's troubled Vietnam operations.
Its subsidiaries – Heungwoo Vina and Yongha Vina – are the suppliers of materials for expressway projects in Vietnam.
In Vietnam, POSCO E&C ventured with the Vietnam Expressway Corporation (VEC) to build the 55-km Ho Chi Minh City-Long Thanh-Dau Giay Expressway connecting HCMC and Dong Nai Province and the Noi Bai-Lao Cai Expressway linking Hanoi and Lao Cai Province.
Both projects lagged behind schedule.
Only a couple of weeks before the launch of the first section of the Ho Chi Minh City-Long Thanh-Dau Giay Expressway in 2013, Thanh Nien found that many of its materials had been siphoned off, which prompted police to launch an investigation.
Three companies and 11 people, including foreigners, were penalized in the case that has raised suspicions of graft and the siphoning-off of construction materials in large infrastructure projects.
Posco was also named among 57 contractors that failed to meet requirements while undertaking state-funded infrastructure projects in Vietnam, according to an annual ranking by the transport ministry last May.
The companies were assessed based on various categories ranging from their ability to mobilize staff and equipment, follow schedules, guarantee safety, settle payments and provide follow-up service after project completion.
Project investors and managers were also included in the rankings, which the Transport Ministry began in 2012 following multiple project delays caused by poorly organized contractors.