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South Korean company pleads guilty in U.S military base corruption scandal

South Korean engineering giant SK pleaded guilty to fraud in obtaining contracts for the massive construction project at Camp Humphreys, the U.S. military base in Pyeongtaek. Photo by Yonhap
South Korean engineering giant SK pleaded guilty to fraud in obtaining contracts for the massive construction project at Camp Humphreys, the U.S. military base in Pyeongtaek. Photo by Yonhap

SEOUL, June 11 (UPI) -- One of South Korea's largest engineering firms, SK Engineering and Construction, pleaded guilty to one count of wire fraud in obtaining a construction contract worth hundreds of millions of dollars from the U.S. Army, the Department of Justice announced Wednesday.

SK received a contract in 2008 at Camp Humphreys, the headquarters of United States Forces Korea, by funneling payments to an official with the U.S. Army Corps of Engineers, according to plea documents.

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SK agreed to pay a total $68.4 million in criminal and civil fines and restitution to the U.S. Army in a plea agreement entered in a Western District of Tennessee federal court. The company will also serve three years of probation, during which SK will not pursue U.S. federal government contracts.

SK created a fake construction company to cover roughly $2.6 million in payments to the official and submitted false documents to the U.S. Army, the Department of Justice said. The company also admitted that its employees obstructed the criminal investigation by burning documents and attempting to persuade an individual not to cooperate with U.S. authorities.

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"Today's guilty plea and substantial criminal penalty sends a clear message," said Assistant Attorney General Brian A. Benczkowski of the Justice Department's Criminal Division. "[C]ompanies like SK -- which withheld and destroyed documents, attempted to persuade a witness not to cooperate and failed to discipline any responsible employees -- will pay a price."

The criminal fines of more than $60.5 million are the largest ever imposed in the Western District of Tennessee. SK also paid civil penalties amounting to $5.2 million and an additional $2.6 million in restitution to the U.S. Army.

Two SK employees, Lee Hyeong-won and Lee Dong-Guel, were indicted by a federal grand jury on charges of conspiracy, fraud and obstruction in 2018, but the two remain fugitives of justice, the Justice Department added.

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"American contracts are not for sale in the United States, nor abroad," said Paul Delacourt, assistant director at the FBI's Los Angeles field office, which helped investigate the case. He added the judgment would send a message "that the FBI and our partners will hold accountable those who threaten the integrity of our military operations and who abuse their position to profit personally at the expense of American taxpayers."

The roughly $11 billion expansion of Camp Humphreys into the main command for American troops deployed on the Korean Peninsula was plagued by construction delays and cost overruns.

Plans to consolidate troops at the base in Pyeongtaek, located some 40 miles south of Seoul, date back to 2004. The move was originally slated to take place in 2008, but U.S. Forces Korea did not relocate their headquarters there until 2018.

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With some 42,000 soldiers and civilians, Camp Humphreys is the U.S. Army's largest overseas base and was the largest construction project in the U.S. Department of Defense's history. Under a defense cost-sharing agreement with the United States, South Korea paid for approximately 90 percent of the expansion project.

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