DOD Bid Process Dogged By Corruption | NTK Network DOD Bid Process Dogged By Corruption

DOD Bid Process Dogged By Corruption

KAI’s controversies have also entangled their Trainer business partner, Lockheed Martin.

By NTK Staff | 06.14.2018 @8:00am
DOD Bid Process Dogged By Corruption

President Trump’s administration is at risk of partnering with a foreign-owned, scandal-plagued company for one of the top defense contracts this year.

Trump may be unintentionally adding another scandal to his resume as the Air Force considers giving the contract for the T-X Trainer to Lockheed Martin and their partner Korean Aerospace Industries (KAI), the company that dominated headlines the last few weeks for its involvement in the Michael Cohen scandal.

The Washington Post reported the FBI is probing Cohen’s deal with KAI, which paid Cohen $150,000 around the same time the contract proposals were filed.

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 Post reports that “Cohen has no known experience in government accounting.”

Another company fighting for the Trainer contract, Leonardo, has had three consecutive CEOs investigated for corruption or sentenced to prison. Its current CEO was relieved of his last job due to accusations of allowing Libyan influence, and Leonardo is in fact partially owned by the Libyan government, which had 85 percent of its assets frozen by the United Nations for “misappropriation and corruption.”

A company with a history of scandals and corruption issues could have serious implications for the product’s development, and doesn’t jive well with the President’s promise to end “swamp” style corruption.

Well before the Cohen engagement allegedly took place, 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.

KAI’s controversies have also entangled their Trainer business partner, Lockheed Martin.

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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