Another Defense Industry Scandal Breaks Out: What Should Be DAPA's Stance on Serial Corruption?

Five people, including the head of a parts manufacturing and distribution company, the head of an outsourced maintenance firm, and maintenance mechanics, have been indicted by the Nonsan Branch of the Daejeon District Prosecution Office on charges of illicitly obtaining 12.8 billion won from the Defense Acquisition Program Administration (DAPA) by supplying counterfeit parts for KF-16 fighter jets disguised as genuine ones. The prosecution stated that they exported self-manufactured parts to the United States and re-imported them to supply as genuine U.S. products, and also secretly removed parts from KF-16 aircraft to use them for maintaining other KF-16s in a "part-swapping" scheme.

Just a month and a half after the announcement of the largest-ever defense procurement scandal involving LIG D&A and DAPA, another defense corruption case has broken out. Although the KF-16 fighter jet corruption scandal is smaller in scale than the LIG D&A case, the crimes spanned well over 10 years, and the financial amount is substantial considering the companies involved are small. This is an alarming situation. Amid a clear downward trend for the Korean defense industry since its massive contracts with Poland in 2022, defense corruption scandals—akin to deadly poison to "K-defense"—are surfacing one after another.

The role of DAPA is crucial. Defense corruption is a security crime committed through national defense funds. Only by making an example that "if caught, you will inevitably be ruined" can recurrence be prevented. The moment leniency is shown, situations like the KDDX (Korea Next-Generation Destroyer) project—which delayed deployment over several years and destroyed trust in the defense industry—are bound to happen again.
 
The Nonsan Branch of the Daejeon District Prosecution Office announced on October 8 that it had arrested and indicted three individuals—the representative of the fighter parts manufacturing and distribution company (identified as A), an outsourced maintenance mechanic (B), and the representative of an outsourced maintenance firm (C)—on charges of violating the Act on Special Measures Concerning Crimes on Military Supplies. Two others, including a process certifier and a mechanic at the outsourced maintenance firm, were indicted without detention.

A and the others are accused of exporting counterfeit downconverters—fighter jet parts manufactured domestically—to the United States between August 2014 and February of last year, re-importing them, disguising them as genuine U.S.-made parts, and supplying them to DAPA to receive 12.8 billion won. They are also accused of pocketing 850 million won through a "part-swapping" scheme, arbitrarily taking parts from KF-16 transceivers deemed unrepairable and using them in other KF-16s.

The prosecution characterized the case as "a grave matter that fundamentally undermined the reliability and safety of national defense, security, and Air Force combat readiness." Bafflingly, A is known to have purchased yachts and private aircraft with the criminal proceeds. Even the defense corruption scandals that caused public uproars under the Park Geun-hye and Moon Jae-in administrations were not to this extent.
 
The reason the LIG D&A–DAPA scandal is called the largest defense corruption case in history is that the bribe amounts taken by DAPA officials, the scale of the company involved, and the ranks of those implicated are unprecedentedly large and high. A Grade 5 DAPA official is accused of taking 460 million won in bribes, and the case involves a vice president and a managing director of major defense contractor LIG D&A as of this year. The entertainment and hospitality detailed in the indictment are shameless.

LIG D&A appears to have illicitly won six defense procurement projects. This led the Suwon District Prosecutors' Office to call it an "anti-state serious crime." In particular, the prosecution emphasized that "by illicitly winning three projects, including intelligent signal detection technology, it gained an advantageous position in the competition for the electronic warfare aircraft system development project."

On August 21, the day after the Suwon District Prosecutors' Office announced its investigation findings, LIG D&A issued a statement. Out of 17 sentences, including the title and greeting, only a single sentence expressed regret. It dismissed the prosecution's findings regarding the electronic warfare aircraft system development project as "groundless allegations." It then concluded the statement by saying it would "strive to establish a compliance system," a framework designed to manage corporate lawful operations.


On October 6, LIG D&A held a declaration ceremony to strengthen its compliance program. In a press release, LIG D&A pledged to "strengthen ongoing monitoring to enhance transparency, improve compliance training programs for employees, and reorganize its compliance framework." LIG D&A CEO Shin Ick-hyun urged, "Please watch our renewal efforts to build trust that meets global standards."

Although the event was undoubtedly triggered by the defense corruption scandal, LIG D&A's press release on strengthening compliance did not mention the scandal at all. Critics point out that its awareness of the corruption case has regressed even further compared to its earlier statement. An executive at another defense contractor asked this reporter, "There is no public apology or news of disciplinary action against the indicted executives; isn't it surreal to see LIG D&A holding a compliance event as if nothing happened?" A senior DAPA official pointed out, "I hear LIG D&A's government relations team has recently been putting immense effort into lobbying the National Assembly to elicit sympathetic remarks during DAPA's parliamentary audit, which is deeply uncomfortable to watch."
  The KDDX military secret theft incident was also a major defense scandal. The theft occurred 14 years ago, and the first report surfaced 6 years ago. Starting from the basic design phase, DAPA repeatedly handed out indulgences. Only after continuous media criticism did it reluctantly set out on a path toward normalization starting last year. After wasting time and drawing heavy criticism for "inviting distrust in defense projects by being lenient just because it was a big thief," DAPA finally selected the contractor for the detailed design only in June.

DAPA must treat both the LIG D&A case and the KF-16 parts and maintenance contractor case with utmost gravity. The LIG D&A scandal involves allegations of using defense funds for bribes, while the KF-16 scandal involves allegations of buying yachts and light aircraft with defense funds. In particular, one pillar of the LIG D&A scandal is a DAPA official. Furthermore, LIG D&A is one of the major defense contractors that DAPA has long favored, and perhaps because of this, voices of self-reflection are scarcely heard. DAPA must keep in mind that whether the companies involved are large or small, the blade of sanctions must be equally sharp.

If DAPA vacillates and waffles while walking on eggshells as it did with the KDDX secret theft incident, another defense corruption scandal will break out. The way DAPA handled the KDDX case with kid gloves may have loosened industry discipline and given rise to today's corruption scandals. At a time when exports are already sluggish, if defense scandals continue to erupt one after another, K-defense could lose its hard-won public support in an instant. To strictly overcome this crisis of defense corruption and set K-defense straight, DAPA must pull itself together.
※ Please note: This article was translated by AI and may contain errors.