KT ex-CEO offices raided as corruption scandal escalates

Seoul prosecutors raided the homes and offices of KT Corp.'s current acting CEO and two former CEOs Thursday as they continue their probe into alleged corrupt practices at the Korean telco. The scandal, which erupted late last year as the board tried to reappoint then-CEO Ku Hyeon-mo to a further term, has left Korea's biggest telco without a permanent CEO ever since.

The raids follow the issue of an arrest warrant last week for Hwang Wook-jung, president of KT contractor KDFS, on charges of breach of trust and embezzlement, official news service Yonhap reported.

Hwang allegedly had provided property benefits to KT executives in 2021 in return for awarding contracts to KDFS. Prosecutors are believed to have obtained an audio file in which Hwang refers to Ku and another ex-CEO, Nam Joong-soo, in discussing the preferential contracts, broadcaster KBS reported. Both Ku and Nam face charges of violating the fair trade and subcontract laws.

On the upside, KT's leaderless interlude is likely set to end shortly. The newly appointed board has said it will have whittled its shortlist down to a single candidate by the first week of August, with shareholders able to vote on their recommendation by end-August.

New independent chairman

The board says it has received 20 applications for the post, including one approved by major shareholders and six commended by professional recruitment agencies. Interim CEO Park Jong-Ook has said he will not be a candidate and will not take part in the selection process "to ensure fairness."

The board last month elected independent director Yoon Jong-Soo, lawyer and former Environment vice-minister, as chairman. It also approved seven new independent directors and endorsed a proposal to reduce the number of executive directors from three to two.

Eighteen months ago KT copped a $6.3 million fine from the SEC for paying bribes and running slush funds – the same behavior that Korean authorities today are accusing the company of engaging in.

The leadership vacuum appears to be weighing on KT's business as well as its reputation. M&A deals have completely dried up, according to business news site Pulse. It hasn't executed a single acquisition since November.

Over the previous three years, with Ku Hyeon-mo at the helm, it had completed 15 M&As worth around 2 trillion Korean won (US$1.6 billion). Last year it invested KRW30 billion ($23 million) in AI chip firm Rebellions and KRW130 billion ($101 million) in cloud managed service provider Megazone Cloud Corp.

By contrast, rivals SK Telecom have carried out multiple deals this year – notably SKT's $100 million investment in US urban mobility company Joby Aviation, while LG Uplus has tipped more than 10 billion won into local startups.

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— Robert Clark, Contributing Editor, special to Light Reading