KT to Pay 7.5 Billion Won in Fines and Penalties to U.S. Securities and Exchange Commission

KT States "Will Strengthen Compliance"

[Asia Economy Reporter Cha Min-young] The U.S. Securities and Exchange Commission (SEC) has imposed a total fine and penalty of approximately 7.5 billion KRW on KT for violating the Foreign Corrupt Practices Act (FCPA). KT neither officially admitted nor denied the investigation results but accepted the SEC order.

On the 17th (local time), the U.S. SEC announced that "KT, headquartered in Seoul, provided improper benefits to public officials in South Korea and Vietnam," citing violations of the Foreign Corrupt Practices Act of 1977 (FCPA) and imposing a total fine and penalty of $6.3 million (about 7.5 billion KRW).

According to the SEC investigation results, which have continued since 2009, senior executives at KT created illegal cash slush funds over several years to provide to government officials and active members of the National Assembly in South Korea and Vietnam. In South Korea, various means were used to secure slush funds, including charitable donations, third-party payments, inflating executive bonuses followed by cash conversion, and purchasing gift cards followed by cash conversion. When purchasing gift cards for cash conversion, the phrase 'CR case' was added to distinguish them.

The SEC also mentioned that in November last year, the Korean prosecution indicted the company and 14 executives for criminal acts related to KT’s illegal political slush fund creation. The Seoul Central District Prosecutors’ Office Economic Crime Division filed a summary indictment against CEO Koo Hyun-mo and 10 other executives for violations of the Political Funds Act and embezzlement. In the summary order, CEO Koo was fined a total of 15 million KRW but has appealed and requested a formal trial.

Political slush fund use was also detected in Vietnam. According to the SEC, KT discussed and executed plans to provide slush funds to relevant high-ranking Vietnamese officials to secure two contracts: the 'Solar Power Generation System Construction Project' with the Quang Binh Provincial People's Committee and the 'Vocational College Project' with the Vietnamese Ministry of Labor, Invalids and Social Affairs.

The SEC pointed out that the absence of internal accounting controls allowed employees to commit such illegal acts. The SEC emphasized, "KT failed to implement a business-related internal accounting control system for over ten years and lacked anti-corruption policies. As a publicly listed company, KT must pay appropriate attention to fulfilling its obligations under the FCPA."

However, the SEC noted that KT agreed to a civil penalty of $3.5 million and a disgorgement order of $2.8 million without admitting or denying the findings of the SEC investigation.

KT stated regarding this matter, "The company will strengthen its compliance (internal control) system."

KT was listed on the New York Stock Exchange in May 1999 through American Depositary Receipts (ADR).

This content was produced with the assistance of AI translation services.