KAI is suspected to have given contracts to the suppliers without a fair bidding process and taken bribery and kickbacks from them. Prosecutors also searched its Sacheon headquarters and Seoul office Friday over allegations that the company made at least 24 billion won ($21.3 million) in illicit profits by inflating development costs for such products as the Surion utility helicopters, T-50 supersonic trainer jets and FA-50 light attack planes.

The prosecution is also believed to be looking into the possibility that KAI Chief Executive Ha Sung-yong created slush funds and inappropriately lobbied Cheong Wa Dae officials and lawmakers for his reappointment in May 2016. He has been barred from overseas travel upon prosecutors’ request.

The probe came as President Moon Jae-in steps up efforts to stamp out rampant industry corruption for which he unveiled plans on Monday to revive an intra-agency panel after a 10-year hiatus. Since the campaign period, he has singled out irregularities in military procurement deals as one of the “deep-rooted evils” to be eradicated.

“Defense industry corruption is not just corruption but an act of benefiting the enemy that would punch a hole in national security,” the president said at a meeting of senior secretaries and advisers, calling for an independent audit and investigation, as well as institutional prevention measures by the panel.

The sector has been blamed for cultivating a cozy relationship between former and incumbent military commanders and industry executives often involving kickbacks for fake performance certificates or slackened test rules.

Among the raided five subcontractors, two were founded or owned by former KAI officials close to Ha. One of the firms was set up in 2013, shortly after Ha took office, and its annual revenues, most of which come from supplies to KAI, have since more than doubled to 9.2 billion won in 2016 from 3.9 billion won in 2014.

A senior official at KAI is also alleged to have embezzled more than 20 billion won by giving inflated orders to a service contractor he established under the name of his brother-in-law. He has vanished since the probe was incepted.

By Shin Hyon-hee (heeshin@heraldcorp.com)