Tuesday, October 20, 2009

Saab Denies Role in Seoul Bribery Case


Bribery allegations involving Swedish defense group Saab have been a fresh blow to South Korea's already ill-fated effort to build a homegrown fighter jet.According to the Defense Security Command (DSC), Seoul's military spy agency, officials from the DSC and the National Intelligence Service raided Saab's branch office in the South Korean capital last month after receiving a seizure and search warrant from the Seoul Prosecutor's Office.

The authorities also raided the Security Management Institute (SMI), a private defense research agency in Seoul suspected of having leaked secret information on the KF-X requirements, including the engine type, thrust and maximum takeoff weight, to Saab.DSC Commander Lt. Gen. Kim Jong-tae said in a parliamentary audit Oct. 6 that six people, including incumbent military officers, were suspected of leaking classified information.

South Korean prosecutors Oct. 16 arrested a former Air Force major general for leaking classified military information to Saab, Agence France-Presse (AFP) reported. He is suspected of handing over to the company information on the KF-X program to develop stealth fighters, an official at the prosecutors' office in Seoul told AFP. He declined to give details.Saab has been referred to as a viable candidate to join the now-delayed KF-X project, aimed at developing an F-16-class aircraft to replace South Korea's aging F-4s and F-5s.

Saab has rejected suggestions that it offered inducements for classified information on the KF-X project. The company intends to cooperate in "every way" with the investigating authorities in South Korea, Ake Svensson, group president and CEO, told Swedish TV channel TV4. The company is awaiting further information relating to the reasons behind the raids on the Seoul offices of both Saab and SMI, he said.

"We have not been told that any employees of Saab are involved for certain," Svensson said.Saab maintains that its association with SMI has always been open, transparent, professional and lawful.The Swedish defense company confirmed that it spent $17,200 to fund the visit of SMI President Hwang Dong-joon to Stockholm in March to attend a trade seminar hosted by Exportradet, Sweden's export trade council, which continues to work with Saab to market the Gripen-NG worldwide.

The SMI president met with officials from both Saab, a seminar sponsor, and Exportradet during his visit to Stockholm, according to Exportradet and Saab. Exportradet's direct contacts with SMI were established through its office here."If this is what is referred to as inducements, we would like to know in order to resolve the matter very quickly," Saab spokesperson Cecilia Schön Jansson said. "There is absolutely no indication that we would have paid any form of inducements. What we do know is that there is ongoing investigation into our representative office in Seoul."

DSC officials alleged that the sums involved were greater than that acknowledged by Saab.Saab has not been informed whether any of its three Seoul office employees, including a Swedish national, are suspected of any crime, Jansson said.

The Swedish government, through Exportradet and Saab, has expressed interest in forming a partnership to support South Korea's ambition to build a stealth combat aircraft. Sweden has offered to discuss an alliance that would see South Korea participate in the development of the next-generation Gripen program, while Saab is also interested in collaborating in the KF-X development using Swedish stealth technologies.

The South Korean probe is the latest to charge Saab with financial impropriety. In June, Sweden's Prosecutor's Office cited "a lack of clear evidence" when it dropped its investigation into alleged inducements paid by Saab, between 2004 and 2007, to secure Gripen export deals with South Africa, the Czech Republic and Hungary.

The KF-X program, which in 2007 was assessed as not viable economically and technically, has been postponed again due to the small increase of next year's defense budget. The original proposal was to spend 1.4 billion won ($1.2 million) to initiate development. Estimates of the total cost vary, with the Defense Acquisition Program Administration estimating about 100 billion won for development, spokesman Kim Young-san said.

Other foreign aircraft powerhouses have shown interest in the KF-X development. Boeing, Lockheed Martin and EADS officials said they were closely monitoring the case."We're aware of this investigation going on, but from Boeing's standpoint, I don't see anything for us in there," said Gregory Laxton, vice president of Boeing Korea.

The South Korean Defense Ministry is to hold a KF-X feasibility meeting later this month, based on the results of a six-month study by the Weapons Systems Concept Development and Application Research Center of Konkuk University, here.

Observers in Seoul say the investigation of Saab is part of South Korean President Lee Myung-bak's administration's push to root out illegal lobbying and other irregular activities by domestic and foreign firms in lucrative weapon procurements.

In July, Lee hinted at his anti-corruption effort, citing a problem with large rebate payments in arms deals."I believe about 20 percent of the defense budget could be saved annually if rebate payments in arms acquisition programs will be removed substantially," Lee said while being briefed on next year's national budget plan by the Ministry of Strategy and Finance.

In an apparent move to respond to the president's call, prosecution and security authorities are looking into any possible irregularities involving defense firms.

■ On Oct. 7, prosecutors raided Samsung Techwin, charging it tried, in collaboration with a foreign spare parts provider, with inflating the unit cost of the K-9 155mm self-propelled howitzer when the vehicles are delivered to the military.

■ Last month, Doosan Infracore was investigated for inflating the costs of engines for the Navy's next-generation patrol killer boats.

■ In July, Ilkwang, a medium-sized defense firm, was raided, with prosecutors alleging it tried to secure classified information on programs such as the Korea Utility Helicopter from procurement officials. The company was also accused of creating a slush fund and evading some 70 billion won in taxes. ■

Agence France-Presse contributed to this report from Seoul.


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