IBM Korea's scandal brewing since 1998

Earlier this week, some 48 government officials and executives, mostly from IBM-related companies, were charged with rigging state contracts for computer equipment.

A South Korean prosecutor has since disclosed further details pertaining to the incident, saying the misconduct has been going on since 1998.

The Seoul District Prosecutor's Office revealed that IBM’s business unit in Korea, LG IBM PC, a joint venture between Big Blue and Korean firm LG electronics, as well as 13 companies had bought off clients and made rigged bids for a number of business deals.

According to the statement from Korean authorities, IBM Korea built up a slush fund through Winsol, a local reseller. The firm is alleged to have spent US$1.3 million on illegal collusion, US$302,000 on a bribe and used US$167,000 to support LG IBM PC's lobbying efforts. In addition, IBM Korea gave Winsol shares to government officials as bribes, said a district prosecutor handling the case.

The people who received the kickbacks were IT managers at Korea’s Ministry of Information and Communications, the National Tax Service, Korea Telecom, Korea Electronics and several other public organizations, the statement said. 11 public servants have been arrested and others have been indicted without detention.

The investigations showed IBM Korea and its counterparts have won contracts worth US$43 million from the alleged misconduct. LG IBM PC in itself sold US$725,000 worth of goods as a result of the lobbying, the inquiry revealed.

"The case is about intentional, illegal collusions among IT managers, hardware vendors and its resellers. We think that related official organizations should make contract processes clearer," said a spokesman from the Seoul District Prosecutor's Office.

"We don't raise slush funds. We have already fired related executives and are taking appropriate measures," an IBM Korea representative said in the company’s defense.

ZDNet Korea's Yong-Young Kim reported from Seoul.