The Securities and Exchange Commission (SEC) said last night that KT had violated the US Foreign Corrupt Practices Act (FCPA) by providing improper payments for the benefit of government officials in the two countries.
KT consented to the SEC’s order without admitting or denying the findings that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934, and agreed to pay approximately $3.5 million in civil penalties and $2.8 million in disgorgement, a total of $6.3 million, more than twice as much as the alleged Korean bribes.
KT now has to report to the SEC every six months for two years about “the status of its remediation and implementation of compliance measures”.
The SEC has authority to impose the penalties because KT’s American Depositary Receipts (ADRs) are traded on the New York Stock Exchange (NYSE), which is subject to the regulator’s supervision.
Last night’s decision follows only three months after a prosecutor in Seoul charged KT’s CEO, Ku Hyeon-mo (pictured), and 13 other company with making illegal political donations.
According to the Korea Herald in November, Ku and the KT officials are suspected of having purchased commercial gift certificates using company funds before selling them to create a secret slush fund used to offer small-sized donations to 13 politicians in September 2016.
In the US, the SEC’s Charles Cain, chief of its enforcement division’s FCPA unit, said: “For nearly a decade, KT Corp failed to implement sufficient internal accounting controls with respect to key aspects of its business operations, while at the same time lacking relevant anti-corruption policies or procedures.”
The SEC said that employees, “including high-level executives, were able to generate slush funds that were used for gifts and illegal political contributions to government officials in Korea who had influence over KT Corp’s business”.
It added: “Other employees were able to make payments in connection with seeking business from government customers in Vietnam.”
Harry Cassin of the US-based FCPA Blog noted: “The slush fund in South Korea totalled around $1.3 million.” He added: “Between 2015 and 2016, KT Corporation also made payments of over $1.6 million to three organizations at the request of high-level government officials. Two of the payments were made at the instruction of the Blue House, Korea’s presidential residence and office.”
In Vietnam, says the FCPA Blog, KT “arranged with a construction company … to pay a bribe of about $95,000 to a high-level official in 2014”, and later booked “a $200,000 payment to the construction company”.
In September 2021 KT completed the acquisition of Epsilon Telecommunications for $145 million.
