Former POSCO E&C executive's home raided

By Lee Kyung-min

Chung Dong-hwa

Prosecutors on Friday raided the home of former POSCO Engineering and Construction Vice Chairman Chung Dong-hwa as part of a widening investigation into a slush fund scandal involving the firm.

The raid came amid reports that Chung will be summoned for questioning next week about a slush fund the company created while carrying out construction projects in Vietnam from 2009-2012. Chung is suspected of having played a central role in creating and using the fund, estimated at 10 billion won ($9 million), prosecutors said.

Prosecutors said they seized computer hard disks and documents at his home.

Already, prosecutors secured testimony and evidence to prove the allegations from a former executive surnamed Park, who headed POSCO E&C's Vietnamese unit.

Park allegedly helped the firm create a 10 billion won slush fund and transfer 4 billion won of the money, and the prosecution is investigating on what it was spent.

Suspicions are that under the former vice chairman’s reign, POSCO offered the money as kickbacks to high-profile policymakers in Korea under the former Lee Myung-bak administration.

Chung had close ties with key figures in the Lee administration, including former Vice Minister of Knowledge Economy Park Young-june and JN Tech Chairman Lee Dong-jo, who allegedly managed the kickbacks Park received.

It is alleged that those two exercised influence on former Chairman Chung Joon-yang's appointment to the chairmanship, and Chung Dong-hwa was the middleman linking the two with the former chairman. JN Tech's sales jumped largely after it became a subcontractor to POSCO.

Chung Dong-hwa also faces allegations regarding POSCO's takeover of Sungjin Geotec. In 2010, POSCO Plantec acquired Sungjin Geotec, which was on the verge of bankruptcy, at a much-higher-than market price. When Sungjin Geotec won an oil plant project bid in Indonesia in 2012, Chung had his brother-in-law take part in the project consortium.