After a North Korean submarine sank the South Korean naval frigate ROKS Cheonan in March 2010, the Republic of Korea (ROK) navy decided it needed to improve its anti-submarine warfare (ASW) capabilities. The very next month, two of the navy’s existing Super Lynx helicopters, delivered by the British firm Westland in the 1990s, crashed at sea. This combination of events led the ROK’s Defense Acquisition Program Administration to accelerate a program to acquire additional helicopters, and a tender was issued later that year.
The resulting ASW helicopter acquisition program proved that corruption can thrive even when security stakes are of the highest order. 46 sailors died in the Cheonan incident and North Korea operates around 70 attack submarines in total. At the same time, Pyongyang is working toward a submarine-launched ballistic missile capability. Yet when ROK naval officials were tasked to evaluate the options for South Korea’s new ASW helicopter, key senior officers conspired to fabricate a key assessment report after receiving bribes from Westland’s new parent company, Finmeccanica (recently renamed Leonardo). The resulting scandal stemming from the AW-159 acquisition program brought down the retired head of the military as well as a former minister.
Buyer Country: Republic of Korea
Seller companies/countries: AgustaWestland (United Kingdom), subsidiary of Finmeccanica (Italy)
Year of Procurement Decisions: 2013
Equipment Sold: 8 AgustaWestland AW-159 Wildcat Anti-Submarine Warfare (ASW) helicopters
Value of Deal: USD 570 million (USD 370 million for the helicopters, the remainder for related systems)
Sum involved in corruption allegations: USD 1.3 million (at minimum)
Choi Yoon-hee – Former chairman of the ROK Joint Chiefs of Staff (October 2013 – October 2015), chief of naval operations at the time of the evaluations. Convicted November 2016 for accepting bribes and sentenced to a prison term of one year.
Rear Admiral “Park” (no first name published in the press) – Senior Navy official in the acquisition program. Charged in June 2015 with fabricating evaluation reports of the AW-159 in 2012.
Kim Yang – Former Minister of Patriots and Veterans Affairs (2008-2011). Convicted in January 2016 for accepting USD 1.22 million in bribes to influence the procurement and sentenced to four years in prison.
Ham Tae-heon – Arms manufacturer and broker. Convicted in November 2016 on charges of paying bribes to officials on behalf of AgustaWestland and sentenced to two years in prison.
The arms deal
The tender for ASW helicopters led to a competition between Sikorsky’s “Seahawk” MH-60R and the AgustaWestland “Lynx Wildcat” AW-159. The MH-60R had been expected to win due to previous success in tenders offered by Denmark and Australia, although it would likely have been priced higher than the Wildcat at around USD 1 billion for a comparable package. In 2013, South Korea announced its decision to proceed with the AW-159. The cost for the eight helicopters would be USD 370 million, with another USD 200 million to be spent on additional integrated systems.
After a nine-month delay while the helicopters underwent site acceptance tests, the helicopters were delivered in two batches in 2016, and the ROK navy is considering a follow-on tender for twelve additional ASW helicopters.
To win the contract, AgustaWestland bribed Korean naval officials, to the tune of at least USD 1.2 million (definitely identified) to falsify evaluation reports of the AW-159.
Investigations and Outcomes
The investigation into the Wildcat acquisition was part of a major investigation into corruption in arms procurement in general in South Korea, carried out by a Joint Investigations Team (JIT) established in November 2014. By May 2015, the investigators had detained three field-grade naval officers on the suspicion that they had doctored the assessment report for the AW-159 back in late 2012. The purpose of the plot, then, was to give the AW-159 an advantage over the Sikorsky MH-60R. The investigation worked up the chain of command, arresting in June 2015 a rear admiral surnamed “Park,” who in turn revealed the involvement of retired admiral Choi Yoon-hee.
Choi had been chief of naval operations during the course of the tender, and was identified by investigators in late 2015 as the key decision-maker in the conspiracy. After serving as chief of naval operations, Choi had become chairman of the Joint Chiefs of Staff of the ROK military; his term ended and he retired from the military shortly before his arrest. By the time the JIT had completed its work at the end of 2015, they had indicted 74 individuals for involvement in either the AW-159 scandal or for involvement in other corrupt tenders.
Choi was convicted in November 2016 of receiving USD 17,000 in bribes and sentenced to one year in prison. The money was given to Choi’s son by an arms manufacturer named Ham Tae-heon, but investigators established that Choi was aware of the transaction. Ham also performed other favors for friends and family of Choi. However, the prosecution was not able to establish that Choi had ordered the doctoring of the AW-159’s assessment report.
Ham, who is a U.S. citizen, was convicted alongside Choi in November 2016, and received a two year jail sentence for bribe-giving. Ham’s various companies produced, among other defense goods, tank components and the faulty fire-control system for the K11 assault rifle. He had been involved in AgustaWestland’s bid as a broker.
Kim Yang, a former minister for Patriots and Veterans Affairs, was also convicted for receiving bribes in exchange for exerting his influence to secure the tender for the AW-159. He was paid USD 1.22 million for his services to Finmeccanica, and was initially promised up to four times more in payments. Two other named bribe-takers include the president of the Agency for Defense Development Jung Hong-yong, and a researcher at the Korea Institute for Defense Analysis surnamed “Sim.”
In Italy, the former CEO of Finmeccanica, Giuseppe Orsi, and the former head of AgustaWestland, Bruno Spagnolini, were tried for bribery in relation to the sale of helicopters to India. While an appeals court convicted the two in April 2016, they were granted a re-trial in December that year. With the statute of limitations for bribery closing a window for prosecutions at the end of 2017, it is unclear whether the retrial will lead to new convictions. It is also uncertain if Italian prosecutors have incorporated the Korean developments into their investigation.
Original tender information from May 2010: http://www.koreatimes.co.kr/www/news/nation/2010/05/205_66497.html
June 2015 – arrest of RADM “Park”: http://english.yonhapnews.co.kr/news/2015/06/05/0200000000AEN20150605007700315.html
July 2015 – Avionews on Rear Admiral Park – responsible for strategic plan for the ROK navy: http://www.avionews.com/index.php?corpo=see_news_home.php&news_id=1169566&pagina_chiamante=index.php
June 2016 – Wildcats first delivered. mention of involvement of ADM Choi Yoon-hee: http://english.yonhapnews.co.kr/national/2016/06/13/0301000000AEN20160613007000315.html
Nov. 2016 – Convicted and Sentenced, one year for receiving bribe of USD 17,000. Also note involvement of an arms broker named Ham: http://english.yonhapnews.co.kr/national/2016/11/18/63/0301000000AEN20161118005100315F.html
Nov. 2015 – Choi questioned: http://www.koreatimes.co.kr/www/news/nation/2015/11/116_191716.html
Oct. 2015 – notes that Choi was CNO at the time; RADM Park ordered to doctor paper by Choi: http://www.koreatimes.co.kr/www/news/nation/2015/10/116_188230.html
Dec. 2015 – On the intermediary, arms broker Ham Tae-heon: http://www.koreatimes.co.kr/www/news/nation/2016/08/113_193586.html
Who is a U.S. Citizen; more details on Ham: http://www.koreatimes.co.kr/www/news/nation/2015/11/116_191087.html
July 2015 – 63 in total charged in relation with defence corruption:
Kim Yang, former head of the Ministry of Patriots and Veterans Affairs: http://www.pressreader.com/uk/the-scotsman/20150716/281951721499708
Jan 2016 – Kim convicted and sentenced to four years for taking bribes (USD 1.22 mn): http://www.koreatimes.co.kr/www/news/nation/2016/01/116_195179.html
Others indicted: Jung Hong-yong: http://www.koreatimes.co.kr/www/news/nation/2016/12/113_193586.html
Ms. Sim (KIDA): http://www.newseyes.co.kr/info/newsprint?no=3188