SEC Fines South Korean Company for FCPA Violations
South Korea-based KT Corp. agreed to pay $6.3 million after it violated the Foreign Corrupt Practices Act, the Securities and Exchange Commission said Feb. 17. The telecommunications company, “engaged in multiple schemes” to make “improper payments” to government officials in South Korea and Vietnam, the SEC said, and didn’t have adequate internal accounting controls over charitable donations, third-party payments, executive bonuses and gift card purchases.
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The SEC said KT employees created slush funds used for gifts and illegal political contributions to government officials in South Korea. Other employees used bribes to secure business from government customers in Vietnam. The company had “no relevant anti-corruption policies or procedures” for improper payments, the SEC said in an enforcement order, which led to violations of the books and records and internal accounting controls provisions of the FCPA.
The SEC said KT’s “high-level executives” maintained the slush funds 2009 to 2017, including “off-the-books accounts and physical stashes of cash” that employees pulled from to pay bribes. The company made illegal payments to Korean National Assembly members who served on committees relevant to KT’s business, including officials with the “ability to influence KT’s business.” The company labeled the slush fund money as “executive bonuses” to try to conceal the payments, the SEC said.
After media undercovered the bonus scheme, KT developed a new method in which it bought gift cards, converted them to cash and transferred the funds electronically to contribution accounts of Korean lawmakers. This method -- which evaded the country’s Korea’s Political Funds Act that blocks corporations from making political contributions -- resulted in more than $1 million in bribes, the SEC said.
KT made similar payments in Vietnam to obtain government contracts, including one to construct a solar cell power system and another to provide hardware, software and training for five vocational colleges. It paid hundreds of thousands of dollars in bribes associated with the two projects, the SEC said.
The company didn’t voluntarily disclose the violations but cooperated with the SEC’s investigation by “providing translations or summaries of some relevant documents, providing certain facts developed in its own internal investigation, and making certain current and former employees available to the Commission staff,” the SEC said. KT also fired certain employees responsible for the violations and strengthened its compliance procedures and accounting controls and increased anti-bribery training for employees.
As part of an agreement with the SEC, KT must regularly report to the commission on the status of its compliance efforts, including efforts specifically aimed at improving its compliance with the FCPA. The company will pay about $3.5 million in civil penalties and $2.8 million in disgorgement.