South Korea’s AW-159 helicopters

Introduction

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.

Key Facts

Buyer Country: Republic of Korea

Seller companies/countries: AgustaWestland (United Kingdom), subsidiary of Finmeccanica (Italy)

Year of Procurement Decision: 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)

Dramatis Personae

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, but acquitted on appeal.

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.

Geoff Hoon – former UK defense secretary and Manager of International Business at AgustaWestland from 2011 to 2016.

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.

Corruption Allegations

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. The criminal investigation was aided by the prior criminalization of the receipt of money in exchange for lobbying of public officials under the Aggravated Punishment of Specific Crimes act.

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, it 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. An appeals court reversed the verdict in July 2017, however; that decision is now being reviewed by the Supreme Court. Prosecutors established that the suspect money was given to Choi’s son by an arms manufacturer named Ham Tae-heon and argued that Choi was aware of the transaction. While the trial court accepted the prosecution’s evidence on this point, the appeals court rejected it as insufficient. 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. His conviction was also reversed. 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.”

Geoff Hoon, the former UK defense secretary, was one of Kim’s managers at AgustaWestland. Between 2011 and 2016, he was employed by the firm as Manger of International Business. According to a September 2012 email presented at Kim’s trial, Hoon asked him to “actively engage in exerting influence over high-ranking decision-makers in Korea.”

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, a Milan court decided to acquit both in January 2018. It is uncertain if Italian prosecutors have incorporated the Korean developments into their investigation.

Sources

Jung Sung-ki, “Navy looking for 20 new anti-sub helicopters by 2014,” The Korea Times (online), May 25, 2010, http://www.koreatimes.co.kr/www/news/nation/2010/05/205_66497.html.

“Ranking Navy officer arrested in corruption scandal,” Yonhap News Agency, June 5, 2015, http://english.yonhapnews.co.kr/news/2015/06/05/0200000000AEN20150605007700315.html.

“Wildcat maritime choppers arrive in S. Korea,” Yonhap News Agency, June 13, 2016, http://english.yonhapnews.co.kr/national/2016/06/13/0301000000AEN20160613007000315.html.

Amy Watson, “South Korea is rocked by defense corruption scandal,” The Scotsman (online), July 16, 2015, https://www.pressreader.com/uk/the-scotsman/20150716/281951721499708.

Kang Seung-woo, “Ex-JCS chief facing corruption probe,” The Korea Times (online), Oct. 7, 2015, http://www.koreatimes.co.kr/www/news/nation/2015/10/116_188230.html.

Jun Ji-hye, “FBI’s help sought in defense corruption probe,” The Korea Times (online), Nov. 16, 2015, http://www.koreatimes.co.kr/www/news/nation/2015/11/116_191087.html.

Kim Se-jeong, “Ex-JCS head questioned over bribery allegations,” The Korea Times (online), Nov. 24, 2015, http://www.koreatimes.co.kr/www/news/nation/2015/11/116_191716.html.

Kim Rahn, “Ex-JCS head indicted for bribery,” The Korea Times (online), Dec. 20, 2015, http://www.koreatimes.co.kr/www/news/nation/2016/08/113_193586.html.

Lee Kyung-min, “Former veteran affairs minister gets 4 years in prison for bribery,” The Korea Times (online), Jan. 11, 2016, http://www.koreatimes.co.kr/www/news/nation/2016/01/116_195179.html.

“Ex-Joint Chiefs of Staff chief gets jail term for bribery,” Yonhap News Agency, Nov. 18, 2016, http://english.yonhapnews.co.kr/national/2016/11/18/63/0301000000AEN20161118005100315F.html.

Corruption Watch UK, “The Anglo-Italian Job: Leonardo, AgustaWestland and Corruption Around the World,” full report, June 2018, https://docs.wixstatic.com/ugd/54261c_1796bde1633445f0a98ceec15d404203.pdf.

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