Will history repeat itself at KT? Prosecutors raided KT’s head office and its chief Nam Joong-soo’s residence as part of an investigation into bribery allegations involving the telecom operator

2013-10-22 18:26

Will history repeat itself at KT?

Kim Tae-gyu
On Oct. 16, 2008, prosecutors raided KT’s head office in Bundang, Gyeonggi Province and its chief Nam Joong-soo’s residence as part of an investigation into bribery allegations involving the telecom operator and its affiliates. It took less than a month for Nam to resign ― he stepped down on Nov. 5 after a court issued an arrest warrant for him on charges of accepting 300 million won ($260,000) in bribes from subsidiaries and contractors. New CEO Lee Suk-chae filled the vacancy on Jan. 14, 2009, igniting controversy that all prior moves were politically motivated after the launch of the Lee Myung-bak administration in February 2008.Observers say Nam was victimized after refusing influential officials’ requests to put people who contributed to Lee’s victory in the election on KT’s payroll.
Proponents of the scenario contended that it was very unusual to apprehend the head of Korea’s foremost telecom group with annual sales approached 20 trillion won.
Lee took the helm of KT and has managed the carrier over the past five years despite criticism that a host of former politicians and bureaucrats were “parachuted in from above.”
The status of the long-time civil servant, who once worked as information and communication minister, vice finance minister and a top presidential economic aide, seemed steadfast as he was reappointed to a second term last year.
However, the atmosphere changed after the departure of former President Lee and the advent of the incumbent Park Geun-hye administration this February ― Cheong Wa Dae reportedly asked him to leave before his term expires.
Both Cheong Wa Dae and KT rebuffed the reports but hearsay continues that the presidential office wants a new figure in charge of KT, a former state monopoly.
Even though it was privatized in 2002, the company has not been free from government influence.
The prosecution raided KT’s headquarters and Chairman Lee’s house Tuesday, precisely five years after the previous investigation into Nam.
It remains to be seen whether history will repeat itself at KT every five years. Yet, if the past is any indication, the leadership of the corporation will be replaced in the not-so-distant future, according to observers.

KT Chairman Lee’s residence, offices raided

Oct 23,2013

The Supreme Prosecutors’ Office yesterday morning raided the headquarters of mobile carrier KT, some subsidiaries and even the residence of company Chairman Lee Suk-chae to investigate breach of trust accusations. Lee has been summoned to answer questions soon and banned from leaving the country.
The prosecutors’ office dispatched dozens of investigators to five KT buildings, five business partners and six residences of company executives, obtaining hard disks, account books and internal documents. The raid into the second-leading mobile service provider comes after two criminal complaints against Lee by the People’s Solidarity for Participatory Democracy, a civic group, in the past eight months. In February, the group requested the prosecution investigate Lee for causing his company to lose tens of billions of won after he pushed ahead with a handful of businesses that failed.
Earlier this month, the group joined forces with the National Union of Media Workers, which represents journalists, to ask the prosecution to investigate Lee for approving the sale of 39 buildings owned by the telecom giant at 75 percent of their estimated value between 2010 and 2012. The alleged loss to the company amounted to 87 billion won ($82 million), according to the civic group and union’s estimates.
“We are aware that the raids follow the People’s Solidarity for Participatory Democracy’s request for an investigation,” said KT in a simple statement. “We have been doing business based on normal management decisions and have sincerely responded to the prosecution’s investigation.”
KT, formerly known as Korea Telecom, was once the nation’s telecommunications monopoly and a public company. But it was privatized in 2002. Although the government doesn’t own a single share in the company, KT has a bitter history of having its CEO replaced at the start of new administrations, also known as the “public company CEO jinx.” The government tends to consider formerly public companies as their trophies or possessions. Lee’s predecessor, Nam Joong-soo, was forced to step down after a prosecution probe in 2008. Many speculated that Nam was punished because he was close with former President Roh Moo-hyun. The situation is similar at Posco, which went private in 2000.
The National Tax Service earlier last month conducted a “special” investigation of the top steelmaker, and the probe is seen as a way of forcing out Chairman Chung Joon-yang, political insiders say. Chung’s term ends in early 2015.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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