February 17, 2022

South Korea’s largest telecommunications operator enters into SEC resolution to resolve FCPA investigation

On February 17, 2022, KT Corporation (KT), South Korea’s largest telecommunications operator, entered into a resolution with the US Securities and Exchange Commission to resolve allegations that it had violated the books and records and internal controls provisions of the US Foreign Corrupt Practices Act (FCPA). 

According to the SEC Order, between 2009 and 2018, KT provided improper payments to government officials in Korea and Vietnam.  As alleged in the Order, in Korea, high-level KT executives maintained off-book accounts and stashes of cash, which they used to provide gifts, entertainment, charitable donations, and illegal political contributions to Korean government officials, including members of the Korean National Assembly.  The money for these off-book funds came from a scheme in which KT officers and executives received inflated bonuses which they then returned to KT senior executives (who used it to fund the off-book accounts and stashes of cash). 

According to the SEC Order, in Vietnam, KT employees provided money to third parties connected with Vietnamese government officials in exchange for obtaining contracts for two Vietnamese government projects.  In the first project, concerning a contract for a solar power system, a third-party construction company provided $95,031 in cash to a KT employee, who personally delivered the funds to a high-level Vietnamese provincial official.  KT later reimbursed the construction company for this payment, accounting for it as “[s]upport/consulting.”  In the second project, concerning a contract to provide materials for five vocational colleges, KT employees engaged a local agent at the request of a high-ranking Korean government official at the ministry in charge of the project, and made payments to that agent knowing that a portion would be passed on to the government official.  KT employees structured these payments such that they would bypass KT’s financial risk review process.

SEC Press Release | SEC Order