As S. Korean police have raided SK Engineering and Construction (SK E&C), a leading S. Korean builder, and its building site on a US military base in Pyeongtaek as part of probes into slush fund allegations, SK E&C is fretting over any fallout of the slush fund scandal on its long slog to enter the US market.
According to police, an SK E&C subcontractor is alleged to have cooked the books to stash away approximately KRW 1 billion that were handed over to a US military official in 2010, when SK E&C was in the heat of constructing the U.S. Forces Korea base in Pyeongtaek and its surrounding infrastructure.
Police believe that SK E&C was involved in the slush fund. In collaboration with US law enforcement authorities, S. Korean police have even dispatched investigators to the US in search for the alleged bribe-taker.
Meanwhile, lots of questions arise over what the quid pro quo was for the money. Industry insiders say the timing of the slush fund scandal is odd because SK E&C has been in the midst of building the Pyeongtaek base since it won the construction deal back in 2008.
Hence the S. Korean construction industry says that SK E&C may have bribed the USFK official in exchange for turning a blind eye to its violations of safety requirements or some shoddy construction work at the Pyeongtaek base construction site.
SK E&C has been ramping up its efforts to make inroads into the US market since it selected the US as the strategic focus of its overseas business back in 2010. Thus many point out that SK E&C may have engaged in bribery for fear that revelation of any poor quality construction at the Pyeongtaek site could detract from its future business in the US market.
It is also known that SK E&C had considered participating in the relocation US Marines from Okinawa to Guam and in the expansion of the New York City Subway system, only to see its plans founder. But in February SK E&C got its lucky break. It reached a tentative deal to build a USD 1.57 billion natural gas liquefaction plant in Louisiana. Therefore, this slush fund scandal erupted at a sensitive time for SK E&C, which is about to sign a contract on the deal.
According to SK E&C, the U.S. Army Corps of Engineers Far East District (FED) is famous for conducting strict on-site management and supervision. Any construction company that works for the FED has to follow the FED’s construction standards and specifications to a tee. In particular, once any safety problem occurs, prospects for the construction company’s future bids will grow dim.
“This slush fund scandal is probably tormenting SK E&C right now because it has thus far strived to enter the US market. A severe blow to its reputation is also feared in the US market,” a construction industry official said on condition of anonymity.
