The prosecution is expected to seek an arrest warrant for a former POSCO executive on allegations that he stashed away company funds at the steelmaker’s construction operation in Vietnam.

The ex-executive, surnamed Park, has been investigated for allegedly creating dubious slush funds when he was leading the Vietnam project of POSCO Engineering & Construction as the overseas unit chief.

Though Park and POSCO E&C argued that the funds were used as a rebate paid to the builder’s subcontractors, the prosecution has found evidence that a large portion of the money had been utilized elsewhere, according to investigators.
 

The investigative agency recently conducted a full-fledged probe into the case involving the 10 billion won ($9 million) slush fund scandal in Vietnam by raiding some of POSCO E&C’s subcontractors including Heungwoo in Busan.

The discordance between Park’s statement and whereabouts of the money could support the speculation that the POSCO unit had pocketed the funds to hand them over to political heavyweights, prosecutors alleged.

Considering the lack of authenticity in Park and the builder’s statements, the prosecution is likely to ask the court to issue an arrest warrant for the ex-Vietnam unit head, according to insiders in the judicial sector.

The Seoul District Prosecutors’ Office is also fine-tuning the timing of issuing a summons on POSCO’s former vice chairman Chung Dong-hwa and former chairman Chung Joon-yang.

While the conglomerate has been denounced for reckless investment in takeovers, a large portion of its outsourcing firms were found to have close relations with key figures in the former Lee Myung-bak administration.

According to the steel producer’s outsourcing list as of 2012, about 20 percent of its subcontractors were owned by or engaged with Lee’s confidants, the incumbent lawmakers of the Saenuri Party and alumni associations involving the former president.

Among them were the owner of a POSCO subcontractor, surnamed Han, and an internal auditor of a state-run agency, surnamed Kim.

Han, 63, is known to be in charge of sponsoring political funds in Pohang, North Gyeongsang Province. He was found to have played a behind-the-scenes role in supporting Lee’s policies. Kim, 56, was a close aide of the ex-president’s brother Lee Sang-deuk.

Han and Kim were reaping yearly sales of 5.4 billion won and 11 billion won through supplier contracts with POSCO.

Another Kim, 55, the head of a regional builder, was also operating an outsourcing firm for the conglomerate. He is suspected of enjoying favors during the four river refurbishment project initiated by the Lee government.

By Kim Yon-se (kys@heraldcorp.com)