LIG D&A CEO to Appear at National Assembly Audit as Pressure Mounts Over Bribery Allegations

DAPA Administrator Lee Yongcheol: "Firm response to prevent recurrence"
Fairness questioned as handling differs from the HD Hyundai Heavy Industries case

Yonhap News

Shin Ikhyun, CEO of LIG Defense & Aerospace (LIG D&A), will appear as a witness at the National Assembly’s National Defense Committee audit. He was selected as a witness in connection with allegations that LIG D&A employees bribed officials at the Defense Acquisition Program Administration (DAPA).

According to the government on Oct. 26, prosecutors indicted and detained a LIG D&A executive on charges of providing money and other benefits to DAPA officials during bidding for major weapons system development projects. The executive is accused of providing money and other benefits to DAPA officials in exchange for favorable treatment in areas such as proposal evaluations. LIG D&A has said that the specific facts will be established through a trial.

Earlier, DAPA Administrator Lee Yongcheol stressed that the agency would take a strict approach to the bribery allegations involving LIG D&A, saying it would work to restore the organization’s reputation by responding firmly to prevent a recurrence. At a National Assembly National Defense Committee audit of DAPA on Oct. 13, Lee was asked about the LIG D&A bribery case by Chun Haram, a lawmaker from the Reform Party. He said, “We will respond very firmly to this matter, and I believe this must not happen again,” adding, “It would be best to respond in accordance with principles as much as possible.”

DAPA is reportedly considering revoking LIG D&A’s designation as a defense contractor for a counter-small-drone system project. If the designation is revoked, LIG D&A will have difficulty securing a sole-source contract for the project’s mass-production phase.

DAPA has imposed its most severe penalty on LIG D&A, which is implicated in a defense procurement corruption case, barring the company from participating in bids for two years. LIG D&A is on trial over allegations that one of its executives provided DAPA officials with hundreds of millions of won in bribes during bidding for several weapons development projects, including the counter-small-drone system.

However, the ban on bidding only prevents participation in new tenders. It does not restrict sole-source contracts based on a company’s designation as a defense contractor or the designation of its products as defense materiel. The defense contractor designation system allows the government to procure weapons systems through sole-source contracts, selecting a specific company without a competitive tender when stable procurement through general competitive bidding is difficult. LIG D&A developed the counter-small-drone system and was designated as a defense contractor for the project. If the designation is revoked at DAPA’s request, the company will no longer be able to secure a sole-source contract for the mass-production project.

The counter-small-drone system project aims to acquire equipment that can neutralize enemy small drones using technologies including radio-frequency jamming. The total project budget is 122.3 billion won. If the certification is revoked, the agency also plans to recover the additional 1% profit incentive paid to the company over the years. The amount to be recovered is estimated at tens of billions of won.

Some have also criticized DAPA for what they describe as a forced administrative decision. They say the agency swiftly imposed the penalty on LIG D&A based solely on the charges brought by prosecutors, without independently verifying the facts. In the case involving HD Hyundai Heavy Industries’ violation of the Military Secrets Protection Act in connection with the KDDX project, the matter was not referred to the Contract Deliberation Committee until after the Supreme Court upheld the guilty verdict in November 2023. At the time, despite the Supreme Court’s final ruling, DAPA effectively granted the company a pass through “administrative guidance,” invoking the legal argument that “the direct involvement of the CEO or executives had not been proven.”

A LIG D&A representative said, “We deeply regret that these penalties are being discussed based solely on the charges, even though legal proceedings to establish the facts are ongoing,” adding, “We will faithfully present our position through the prescribed procedures.”

This content was produced with the assistance of AI translation services.