Corruption probe expands to SK Innovation

SK Innovation, an energy unit of SK Group, will be the next target for the prosecution’s investigation into the failed “energy diplomacy” of the Lee Myung-bak administration.

The Seoul Central District Prosecutors’ Office said Thursday they are looking into allegations that the company offered bribes to ranking government officials in return for business favors.

The probe came at the request of the Board of Audit and Inspection (BAI). The state auditor claimed that the bribes were given in 2011 to three officials from the Ministry of Knowledge Economy, which is now the Ministry of Trade, Industry and Energy, and two officials from the state-run Korea National Oil Corp. (KNOC).

According to the BAI, SK Innovation purchased three lots of an oilfield in Brazil for $750 million in 2000. It borrowed about 10 percent of the contract money, or $77 million, from the government.

The firm used a special corporate financing program for risky overseas projects, under which the government writes off debt if the projects fail. If the projects succeed, the firms give 4-20 percent of the profits to the government besides the principal and interest.

The price of the lots soared, and SK Innovation was able to sell them to a Danish company in December 2010 for $2.4 billion, more than three times its investment.

According to the contract made at the time of the loans, SK Innovation was supposed to give $658 million to the government.

SK Innovation flatly denied the allegations.

“The allegations are based on a misunderstanding of contract terms,” the firm said in a statement. “We repaid the due amount in accordance with the contract terms.”

The BAI said it obtained tips from the Anti-Corruption and Civil Rights Commission that the company bribed high-profile officials at the ministry and the KNOC who were in charge of reviewing the loans.

The ministry allegedly did not set the amount according to the initial loan regulations but applied other rules, according to the BAI.