South Korean Telecom KT agrees to $6.3-million settlement with SEC

KT Corp. , South Korea’s largest telecommunications provider, has agreed to pay $6.3 million to settle a U.S. Securities and Exchange Commission action over alleged bribes paid in South Korea and Vietnam.

KT’s weak accounting controls enabled it to establish slush funds, some in physical stacks of cash, that were used to pay off public officials, the SEC said Thursday. KT, whose shares trade on the New York Stock Exchange, neither admitted nor denied the SEC’s allegations but consented to the penalty.

The SEC said KT had violated the books-and-records and accounting control provisions of the Foreign Corrupt Practices Act, which require companies to maintain reasonable books so that bribes can’t slip through.

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The alleged misconduct occurred from at least 2009 through 2017, and involved high-level KT executives, the SEC said. The company used a variety of means to build up the funds, paying inflated employee bonuses that were partially converted to slush money, and, after that part of the scheme was reported in the media, gift cards that were converted to cash, the SEC said. The company allegedly used the money for illegal contributions directly to influential South Korean lawmakers and to foundations that officials had suggested.

In Vietnam, where KT sought contracts to build a solar power system and to outfit vocational colleges, the company used third parties as a conduit to pay bribes to officials, the SEC said.

KT didn’t self-report the conduct to the SEC but did cooperate with its investigation, the agency said. The company has since fired certain employees and enhanced its controls, according to the SEC. It has been ordered to report to the SEC on its progress over the next two years.

KT has about 22 million mobile subscribers, 14 million fixed-line subscribers and 9 million internet subscribers, according to a recent securities filing. The company has operations in Asia, Africa, Europe and the Americas.

Attempts to contact KT representatives were unsuccessful.

South Korean authorities in November indicted 14 KT executives in connection with the alleged illegal political contributions.

U.S. and South Korean enforcement efforts have started to prod companies to overhaul a South Korean business culture that was relatively open to bribery in the past, said Fry Wernick, a former U.S. Justice Department anticorruption prosecutor who is now a partner at law firm Vinson & Elkins LLP.

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"The U.S. anticorruption efforts, they are making a difference; you’re seeing a sea change," Mr. Wernick said. "They realize they have to abide by U.S. standards, U.S. regulations, if they want to be publicly traded and listed in the U.S."