Korean bribes for Army contract
Or to rephrase this headline : “US Army and Air Force Exchange Service (AAFES) staff accepting bribes from Korean businessman”. And as always: taking bribes does not lead to the optimal choice. The increased vigilance related to procurement in the armed forces is (unfortunately) absolutely necessary to make sure the armed forces get what they deserve; the best equipment for the right price. Where bribes are being paid, you usually end up with the best equipment for an extreme pricetag, or perhaps worse, crappy stuff for an extreme pricetag. Neither are very beneficial in the long run.
A South Korean businessman, Mr. Jeong, was sentenced today in U.S. District Court for the Northern District of Texas to five years in prison for his role in a bribery conspiracy involving a $206 million telecommunications contract and employees of the Army and Air Force Exchange Service (AAFES), the Justice Department announced. AAFES is a federal entity that provides billions of dollars worth of goods and services annually to U.S. Armed Forces service members and their families around the world.
Between 2001 and 2006 Jeong conspired with two AAFES staff when he agreed to make payments to the officials in the form of cash, travel, entertainment expenses and other things of value in exchange for their aid in securing and maintaining a $206 million telecommunications contract for his company, Samsung Rental Ltd. (SSRT).
In prior plea proceedings, Jeong admitted to providing approximately $80,000 in cash, entertainment and other things of value from October 2001 to August 2005 as bribes to Choy, an AAFES services program manager for the Pacific region, in exchange for Choy’s use of official action to benefit SSRT. Specifically, according to court documents, prior to AAFES’ award of the telecommunications contract to SSRT in 2001, Choy used his official position to gain access to confidential bid proposal information that competing bidders had submitted to AAFES and passed the information to Jeong, who used it to ensure that SSRT submitted the winning bid. Shortly after AAFES awarded the contract to SSRT, Jeong admitted paying $20,000 in cash to Choy, who passed away in 2008.
Jeong also admitted in prior plea proceedings to providing approximately $70,000 in cash, entertainment, travel expenses, stock options and other things of value as bribes to Holloway from May 2003 to April 2005, in exchange for Holloway’s use of official action to benefit SSRT. Jeong admitted making payments to curry favor with Holloway, who, as an AAFES general store manager for several U.S. military bases in Korea, was in a position to seek termination of AAFES’ contract with SSRT following allegations of performance-related problems relating to SSRT’s contractual obligations. After Jeong began paying Holloway, according to court documents, Holloway used official acts and influence to support the contractual relationship between SSRT and AAFES.
On April 21, AAFES official Holloway pleaded guilty for his role in the conspiracy and for not reporting the bribes he admitted he accepted on his income tax returns. Holloway’s sentencing is scheduled for December 16, 2009.
An more intensive investigative effort on corruption should obviously be combined with proper risk management and controls. No matter what you think of the corrupt practices, we should avoid putting staff in a situation where they have the idea they can get away with corruption in the first place. The efforts to beef up awareness and control are not widely published, but we assume (hope) they are in place.
