Bribery scandal hounds Korean firm tapped for PH Navy warships

Carmela Fonbuena
Bribery scandal hounds Korean firm tapped for PH Navy warships
'Hyundai Heavy Industries Co., Ltd. is registered as an illegal businessman and will be restricted from bidding for national projects for two years,' says a news report in South Korea

MANILA, Philippines – The shipbuilding giant that won the P16-billion project to build two warships for the Philippine Navy was banned in its own country because of a bribery conviction that sent officials to jail.

Heavy Hyundai Industries (HHI) cannot participate in any public bidding for government projects in South Korea for a period of two years or until November 2019, according to news reports in South Korea.

“Hyundai Heavy Industries Co., Ltd. is registered as an illegal business and will be restricted from bidding for national projects for two years. Hyundai Heavy Industries filed a lawsuit for cancellation of the cease and desist, but the case was rejected in 2015 and the appeal was rejected in August last year,” read the English translation of a report by the Chosun Ilbo, one of the major newspapers in South Korea. 

Hyundai spoke about the ban to the South Korean media in late January 2018. The news came as the Philippines also scrutinized Hyundai’s implementation of its project with the Philippine Navy. (READ: Bong Go intervenes in P15.5-B project to acquire PH warships)

The ban stemmed from a bribery conviction involving KRW 1.7 billion ($1.6 million or about P80 million). 

A manager at Hyundai was found to have bribed an official at the country’s largest electric power company – Korea Hydro and Nuclear Power (KHNP) – to win a deal to supply parts for a nuclear power plant KHNP was going to build in the United Arab Emirates.

Officials were sent to jail and Hyundai vowed to root out corruption in the company. 

The two-year ban on Hyundai from participation in government projects was handed down back in 2013, but the company appealed it. The Supreme Court ruled to dismiss the appeal with finality in December 2017.

Hyundai said its division that makes special ships – warships and submarines – will be hit but it supposedly accounts for only 3% of the company’s total sales. 

Recent news reports show Hyundai continuing to win big projects worldwide. Kuwait Oil Tanker Company signed a contract with Hyundai to construct 3 “very large carriers.”

A Canadian liquefied natural gas company also selected Hyundai to design and construct what would be the world’s first coast production facility

Controversy in the Philippines

An English version of a report on the ban went viral  in social media pages monitoring modernization projects of the Armed Forces of the Philippines in the first week of February.

In a statement, Magdalo Representative Gary Alejano said the ban on Hyundai in South Korea is another reason to investigate the Frigates Acquisition Project (FAP) of the Philippine Navy. 

“It is corruption in the form of bribery that HHI was found guilty of. It is its own government which tagged HHI as an improper business entity. The integrity of FAP – wherein HHI is the main contractor – will consequently be disputed,” Alejano said.

Rappler sought the assistance of contacts in South Korea to get more details about the ban. The screenshots posted in this report are Google translations of the local web sites provided to Rappler.

VIRAL REPORT. Screenshot of a news report that went viral in social media pages following modernization projects of the Armed Forces of the Philippines

“It is not a first time. There were a lot of corruption cases against HHI,” according to a source in the South Korean media.

Among the links provided to Rappler is a report that shows Hyundai Heavy Industries was raided by government prosecutors in 2015 in relation to investigations into widespread corruption in the country’s defense industry.

Hyundai was accused of bribing an active Navy officer – a high-ranking post in the company upon his retirement – in exchange for helping the company win a bid to build 3 submarines. 

BATTLING CORRUPTION. The company vows to root out corruption

Hyundai Heavy Industries became the center of attention in the Philippines because of disagreements over the implementation of the Navy’s frigates project. 

Former Philippine Navy Vice Admiral Ronald Mercado was unceremoniously ousted from his post after opposing a supplier that Hyundai wanted to tap for the Combat Management System (CMS) of the Philippine warships. 

Hanwha Systems, also a South Korean firm, supposedly failed to meet the technical requirements of the Navy.

In the wake of Mercado’s removal, documents showed that Malacañang intervened while the Department of National Defense and the Philippine Navy debated the CMS selection in January 2017. 

The project was the subject of a two-part investigative report published on Rappler. President Rodrigo Duterte dismissed it as “fake news.”

Special Assistant to the President Christopher “Bong” Go, whose name appeared in the documents, denied any knowledge about the project. 

The documents were part of stacks of documents obtained by Rappler on the frigates project. 

The Senate is expected to investigate the project this month. –

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