DOD Bid Dragged into Cohen Scandal | NTK Network DOD Bid Dragged into Cohen Scandal

DOD Bid Dragged into Cohen Scandal

Well before the recent Cohen plea, KAI was raided multiple times by prosecutors and investigators, due to its allegedly covering up significant flaws in its military chopper.

By NTK Staff | 08.29.2018 @8:00am
DOD Bid Dragged into Cohen Scandal

Michael Cohen stole national headlines recently after pleading guilty to multiple violations and pointing fingers at President Trump. Aside from those nervous in the White House over this latest development, the Cohen scandal could actually have huge consequences for a top Defense Department contract.

The investigation into Cohen really heated up this summer when news broke that Cohen ran a consulting firm that promised high-level access to clients. Among the clients was Korea Aerospace Industries (KAI), a Korean defense company with a long history of corruption.

KAI paid Cohen, who is now facing serious prison time, $150,000 for his services, the nature of which still remains unclear. KAI has partnered with Lockheed Martin for the contract for the T-X Trainer, one of the Air Force’s top contracts.

KAI claims the payment was not related to their contract with Lockheed Martin but was instead for Cohen’s legal advice on accounting services. However, the Washington Post reports that “Cohen has no known experience in government accounting.”

A company with a history of scandals and corruption issues could have serious implications for the product’s development and doesn’t exactly mesh with the President’s promise to “drain the swamp” of corruption.

Well before the recent Cohen plea, KAI was raided multiple times by prosecutors and investigators, due to its allegedly covering up significant flaws in its military chopper, not to mention the executives who were arrested for allegedly embezzling money.

In fact, Lockheed denied allegations that it had illicitly “received business favors from the Park [South Korean] government,” and similar allegations were leveled against KAI. The Korea Times reported that state prosecutors investigated a program involving Lockheed and KAI’s dealings with the Korean government.

State prosecutors investigated KAI on suspicions that it manipulated research and development costs for T-50 Aircraft – the one KAI is entering into the Trainer competition – as well as the Surion helicopter.

The Board of Audit and Inspection (BAI) discovered that KAI officials illegally acquired 54.7 billion won ($48 million) by inflating development costs for the Surion helicopter. KAI officials set up their own companies outside KAI and siphoned funds through business contracts with KAI using the artificial costs.

It is suspected that KAI’s CEO, Ha Sung-yong, was directly involved in embezzling money worth about 500 billion won ($440 million) in fraudulent accounting. Meanwhile, Ha raised his salary and bonus by about 250 million won and 200 million won, respectively.

After the heat turned up, Ha resigned from his position and was later indicted for accounting fraud, bribery, and embezzlement.

In total, 12 KAI executives, including Ha, were indicted on corruption charges in a sweeping crackdown on the company’s questionable practices. One high-ranking official fled law enforcement. Another KAI executive who was in charge of handling overseas deals committed suicide during the investigation

The scandals have been a blot on KAI, from embezzlement to covering up issues with their product. Carrying over that same blot to America’s defense industry may pose a problem for the Trump administration.

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