KT Corp., the nation’s largest fixed line operator, is under siege from union and civic groups demanding the replacement of the top management over allegations of unfair business practices.

At the center of the controversy is the company’s chairman and CEO Lee Suk-chae who is facing claims that he has unlawfully played favorites with unauthorized subcontractors.

The main complaint is that companies not included in the usual pool of subcontractors working for KT obtained contracts. Other allegations involve KT’s investments in online education and subway network systems. Some bombed, while others became lucrative.

In February, the People’s Solidarity for Participatory Democracy referred Lee to the prosecution on charges of negligence.

The problem is that these allegations are being raised only by the newly created second union. Comrpised of just 17 members -- a small number considering that the original union that’s been around longer with 25,000 members -- the second union is at the fore of the smear campaign against Lee.

On Wednesday, the company held a press conference aimed at dispelling the rumors against Lee and the company.

There are simply too many rumors and groundless allegations out there that are hurting our company and our productivity,” said Kim Eun-hye, head of KT’s Communications Office.

She presented many reasons and numbers refuting the allegations, but the bottom line was that Lee was not involved in any such malfeasance and that most of the non-telecom companies acquired by KT were actually lucrative. Last but not least, KT was doing its best to overcome the market saturation and reinvent itself.

Kim also stressed that the KT board had no plans to dismiss Lee, nor did the chairman plan on stepping down.

"All these groundless allegations are adding up to nothing more than a conspiracy," she said.

Kim confirmed that a major press conference chaired by Lee was scheduled for this month, but it would not be -- as rumors have it -- a good-bye ceremony as the event will mostly involve the outlining of future business strategies.

Another reason that KT is bristling against the allegations is the political factor.

"The second union is pretty ruthless and it will do anything to get Lee out of the way, for their own selfish political reasons,” said Cha Wan-gyu of KT’s original union.

Lee has been heading KT since 2009. He is a formerly a career bureaucrat and in his prime he served as the minister of information and communication. It was thanks to such a background that he was able to become the chief executive.

Under his watch, KT merged its wireless and wired networks for enhanced productivity, and was also the first network operator to introduce Apple’s iPhone back in 2009.

Lee also was well aware from the start that the telecommunications industry was becoming rapidly saturated, and looked for non-telecommunication revenue sources. As a result, the company recorded 349.8 billion won ($313.5 million) in non-telecommunications projects last year, up significantly from the 32.3 billion won in 2008, before Lee took the helm.

By Kim Ji-hyun

(jemmie@heraldcorp.com)