CONTENTS
- 1. Military Procurement Corruption | The Concept of Military Procurement Corruption
- 2. Military Procurement Corruption | Principal Types of Military Procurement Corruption
- - Actual Cases of Military Procurement Corruption
- 3. Military Procurement Corruption | Relevant Laws and Levels of Punishment
- - Resulting Administrative and Civil Risks
- 4. Military Procurement Corruption | Investigation and Inquiry Procedures
- 5. Military Procurement Corruption | Self-Response Guide
- 6. Military Procurement Corruption | Key Points of Defense in Military Procurement Corruption Cases
- - If You Need Help With Military Procurement Corruption
1. Military Procurement Corruption | The Concept of Military Procurement Corruption
Military procurement corruption refers to corrupt practices that occur in various areas of military supply, including defense-related contracts, procurement, equipment supply, construction, and logistics.
It can deal a severe blow to the maintenance of military strength, the protection of troops, and the efficient use of the budget, and it is a serious crime that can go beyond a mere contractual breach to result in criminal punishment.
In particular, because military supply is an area where security, speed, and special characteristics are emphasized more than ordinary procurement, related corruption can expand into a broader issue of trust across the military.
Military procurement corruption often arises through collusion between public officials such as military civilian employees, military personnel, and officials of the Defense Acquisition Program Administration and private companies, and it appears in various forms, such as improper solicitation, bribery, preparation of false documents, obstruction of bidding, and false inspection of delivered products.
Military procurement corruption is also divided, depending on where it occurs and who is involved, into internal military corruption and improper conduct led by private companies, and it is an area that must be distinguished from defense industry corruption.
Whereas defense industry corruption refers to improper conduct involving military strategic materiel or advanced weaponry, military procurement corruption refers to corruption related to the supply of ordinary military living goods, construction materials, and general equipment.
2. Military Procurement Corruption | Principal Types of Military Procurement Corruption
Military procurement corruption arises in the following forms.
1. False delivery / delivery of defective goods
-Delivery of low-grade or unusable items that differ from the contracted specifications
-False inspection through collusion with the inspection officer
2. Bid rigging and improper solicitation
-Determining the company to win the bid in advance and conducting only a formal bidding process
-Manipulation of evaluation items and forgery of documents to favor a particular company
3. Bribery
-The delivering company providing money or entertainment to the contracting officer
-Disguising rebates as corporate card charges, outsourcing costs, or advisory fees
4. Illegal subcontracting and the use of shell companies
-Concluding contracts with paper companies that have no substance
-Concealing the actual party that produces and delivers the goods at the subcontracting stage
Actual Cases of Military Procurement Corruption
Let us review actual cases of military procurement corruption.
1. A case of supplying cheap Chinese-made CCTV cameras to a military unit by passing them off as domestic products through bribery
This was a case in which approximately 260 CCTV cameras that the military purchased for a total of 12 billion won, believing them to be domestically produced, were in fact low-cost Chinese-made products.
The supplier was detained, and a military civilian employee and an officer belonging to the Army Logistics Command were also found to have been involved.
2. A case of receiving domestic counterfeit products instead of genuine ones
This was a large-scale military procurement corruption case in which a total of 11 people, including 14 field-grade officers belonging to the Navy Logistics Command, military civilian employees, and private operators, supplied domestic counterfeit parts.
3. A case of supplying substandard ballistic equipment
The Board of Audit and Inspection found that the military had contracted for equipment such as ballistic helmets and body armor under a deliver-first, inspect-later arrangement and, through false quality inspections, issued nonconforming equipment to service members.
3. Military Procurement Corruption | Relevant Laws and Levels of Punishment
Punishment related to military procurement corruption is imposed under the following statutes.
1. Criminal Act
2. Military Criminal Act
3. Act on the Prevention of Corruption and the Establishment and Operation of the Anti-Corruption and Civil Rights Commission
4. Act on Contracts to Which the State Is a Party
5. Defense Acquisition Program Act
Conduct | Level of Punishment |
Receiving a loan or subsidy by fraudulent means | Imprisonment of up to 10 years, imprisonment without labor, or a fine of up to 10 times the amount of the loan or subsidy received |
Transferring, exchanging, or lending property without the approval of the Administrator of the Defense Acquisition Program Administration | Imprisonment or imprisonment without labor for up to 3 years, or a fine of up to 10 million won |
Using state property or goods for purposes other than intended | Imprisonment of up to 1 year or a fine of up to 5 million won |
Resulting Administrative and Civil Risks
Beyond criminal punishment, military procurement corruption can give rise to multiple, overlapping disadvantages, including contract termination, civil liability for damages, designation as an unfair business operator, and disciplinary action.
As a result, administrative and financial disadvantages may continue for years even after the criminal proceedings have concluded, and not only individuals (service members and military civilian employees) but also corporations (supplier companies) may be subject to sanctions.
The following sets out the details of the main risks.
1. Termination of Supply Contracts and Claims for Damages
If a criminal conviction for military procurement corruption becomes final, or if the facts are confirmed through an investigation or audit, the ordering agency (the Ministry of National Defense, the individual armed services, and others) may give notice of contract termination under the State Contracts Act.
At this stage, recovery of the contract price, suspension of payments, and recall of supplied items may also be carried out.
In addition, the government or the military may file a damages lawsuit against the company or the individuals involved on the basis of the Civil Act.
2. Designation as an Unfair Business Operator and Restriction on Participation in Bidding
A company involved in military procurement corruption may be designated as an unfair business operator and may be restricted from participating in bidding for a period of up to 2 years.
An unfair business operator refers to a contracting party or bidder who is found likely to undermine the fair execution of competition or the proper performance of a contract, or who is deemed unsuitable to participate in bidding.
The unlawfulness of the disposition may be contested through administrative litigation, but unless an application to stay its effect is filed during the period of the bidding restriction, participation in public procurement is not possible.
Because such risks are administrative dispositions that proceed independently of the outcome of the criminal trial, separate submission of an explanatory statement and written opinion, as well as a response in administrative litigation, may be required.
For a company in particular, recovery of funds, suspension of deliveries, and a sharp decline in revenue may occur at the same time as contract termination, so analyzing administrative risks together as part of the initial response strategy can be very important.
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4. Military Procurement Corruption | Investigation and Inquiry Procedures
The following reviews the investigation and inquiry procedures for military procurement corruption.
1. Receipt of a Report and Commencement of an Audit
-Internal audit (the Board of Audit and Inspection, the Ministry of National Defense inspector general's office, and others) or external reports (e-People, the Integrity Whistleblowing Center, and others)
-Application of protective measures for internal public-interest whistleblowers
2. Investigation by the Military Police and the Prosecution
-Full-scale investigation by the military police or the prosecution, including search and seizure, tracing of accounts, and analysis of communication records
-Securing statements from those involved and collecting evidence to prove the offense
3. Indictment by the Military Prosecution and Trial Before a Military Court
5. Military Procurement Corruption | Self-Response Guide
The following reviews how to respond to military procurement corruption.
►When You Have Been Notified That You Are Under Investigation
-When you are questioned as a suspect by an investigative agency, you have the right to remain silent and the right to refuse to make statements
-In the early stages of an investigation, the scope of materials secured by the investigative agency may be limited, so rather than hastily admitting to the charges, it is important to accurately organize the facts and obtain the assistance of defense counsel
-For service members and military civilian employees, the matter is notified in advance to their unit, so reporting to superiors within the unit and responding to disciplinary proceedings also need to be handled at the same time
►When You Have Been Notified of Questioning as a Witness
-Even questioning as a witness may later turn into questioning as a suspect, so be careful about the content of your statements
-It is necessary to determine whether you are simply providing information or whether there is a suspicion of involvement, and to grasp the scope of your statements
►When You Are a Private Company Employee Identified as a Perpetrator
-Secure all materials relating to the conclusion of the contract and the supply process, such as supply contracts, tax invoices, inspection documents, and electronic contract records
-Prepare to demonstrate the legitimacy of the supply and the legality of the procedures through emails, messages, and recorded calls with the counterparty
►When You Are a Whistleblower or Suspected of Involvement
-If you have evidence that you refused or warned against unlawful conduct such as improper supply instructions or bid rigging, keep it
-You may apply for protection as a public-interest whistleblower through the internal reporting system
6. Military Procurement Corruption | Key Points of Defense in Military Procurement Corruption Cases
The following reviews the key points of defense in military procurement corruption cases.
1. Demonstrating the Legitimacy of the Supply Contract and Procedures
-Emphasize the procedural legality of the bidding and contract conclusion process
-Secure contract approval and performance verification documents from public institutions such as the Public Procurement Service and the Defense Acquisition Program Administration
2. Limiting the Scope of Participation
-Argue for a narrower scope of participation on the basis of organizational practices, instructions from superiors, and structural problems
-Rebut the grounds for assessing individual charges, such as whether the person played a leading role and whether they received any benefit
3. Presenting Grounds for Mitigation
-Mitigation may be possible based on factors such as whether the person is a first-time offender, whether they reported voluntarily, their efforts to remedy the harm, and their attitude in accepting disciplinary measures
4. Responding to Administrative and Civil Risks at the Same Time
-In addition to the criminal proceedings, prepare a dual response strategy in anticipation of administrative dispositions and civil liability, such as contract termination, damages, and bidding restrictions
If You Need Help With Military Procurement Corruption
Military procurement corruption is a serious crime that threatens the safety of the military and the nation's finances.
Accordingly, investigative agencies have signaled rigorous investigations and punishment, and regardless of the gravity of the charges, a prompt and precise response is called for when such a matter arises.
At Daeryun Law Firm, military law attorneys, corporate law attorneys, and criminal law attorneys who are well versed in military procurement contracts, the defense industry, and procurement analyze cases and establish defense strategies through a closely coordinated task force system.
If you are facing a military procurement corruption case that must be handled on a one-stop basis, covering not only criminal punishment but also the resulting administrative and civil risks, we recommend that you obtain the assistance of a specialist in responding to it.
