Man convicted in SSRT bribery case arrested in Dallas

PYEONGTAEK, South Korea — The businessman convicted earlier this year in a South Korean court of bribing AAFES officials so his company could hold a lucrative Internet contract on military bases has been arrested in the United States on federal bribery conspiracy charges, Stars and Stripes has learned.

Jeong Gi-hwan, 44, was arrested in Dallas by federal agents Wednesday and is being held without bond for his alleged role in a bribery conspiracy, federal authorities told Stars and Stripes on Saturday.

The alleged conspiracy involves his telecommunications company, Samsung Rental Corp. Ltd., also known as SSRT, and former Army and Air Force Exchange Service officials.

Among the former AAFES officials Jeong is accused of bribing is H. Lee Holloway, a Justice Department official told Stars and Stripes.

Holloway was AAFES general manager at Osan Air Base in South Korea from June 2000 through August 2005.

A former SSRT executive who spoke on condition of anonymity said Jeong, a South Korean citizen and resident of Seoul, had traveled to Dallas for a meeting with AAFES officials.

Agents arrested Jeong on a criminal complaint that charges him with bribery; conspiracy to defraud the United States; conspiracy to commit wire fraud; and conspiracy to commit bribery.

Federal authorities accuse Jeong of paying bribes to AAFES employees, who are considered U.S. government employees, to assist SSRT in a $206 million contract to provide home Internet and phone service to U.S. military installations in South Korea.

Authorities also contend that Holloway moved to terminate SSRT’s contract on grounds of poor performance, but then supported the contract after allegedly receiving payments from Jeong.

U.S. Magistrate Judge Paul D. Stickney of the Northern District of Texas ordered Jeong detained after finding grounds to support the charges and deeming Jeong a flight risk, according to a Justice Department news release.

Prosecutors now will have to go before a grand jury and seek an indictment of Jeong.

Jeong was convicted in Suwon District Court in January of paying hundreds of thousands of dollars in bribes to Holloway and former AAFES official Clifton W. Choy.

Choy died of heart failure Aug. 29 in Hawaii at age 56, at a time when he faced possible federal indictment on charges growing out of the SSRT scandal. He had been services program manager at AAFES Pacific headquarters on Camp Foster, Okinawa, from February 2005 until his employment ended in February 2007 after 36 years.

Holloway’s AAFES career of nearly 17 years ended in January 2007 when he was general manager at Fort Benning, Ga.

According to testimony in the South Korean case, Jeong allegedly paid Choy $100,000 to help win the contract and later paid Holloway $68,000 to shield SSRT from trouble over rising customer complaints of alleged price gouging and poor service.

Jeong was sentenced to pay 10 million won (about $10,597), and SSRT was fined 20 million won (about $21,194). He appealed the sentence, but a three-judge panel upheld it in September.

Jeong’s arrest comes after an investigation by agents of the FBI, Internal Revenue Service, and the U.S. Air Force Office of Special Investigations.

Federal prosecutors have been weighing possible further action against Holloway and others, but no indictments have been announced to date.

In May 2003, by which time SSRT had become the object of repeated customer complaints, AAFES extended the contract through 2019.

But by early 2007, amid publicity surrounding the bribery allegations, SSRT was forced to give up the contract.

It transferred the rights to the contract to LG Dacom, through a legal process known as novation.

ADDING 1 link:

November 21, 2008

Note: The following text is a quote:

http://www.usdoj.gov/opa/pr/2008/November/08-crm-1042.html

Korean Businessman Detained in Bribery Conspiracy Involving $206 Million Contract

WASHINGTON - A South Korean businessman was ordered detained today for his alleged role in a bribery conspiracy for a $206 million telecommunications contract involving employees of the Army Air Force Exchange Service (AAFES), Acting Assistant Attorney General Matthew Friedrich of the Criminal Division announced.

Gi-Hwan Jeong, 44, was arrested in Dallas on Nov. 19, 2008, on a criminal complaint charging him with one count of conspiracy to defraud the United States, to commit wire fraud and to commit bribery, and one count of bribery. In ordering Jeong’s detention, Magistrate Judge Paul D. Stickney of the Northern District of Texas found probable cause to support the charges and that Jeong was a flight risk.

According to the affidavit in support of the complaint, AAFES provides goods and services worth billions of dollars to U.S. Armed Forces service members and their families around the world, often referred to as “PX services.” The affidavit alleges that Jeong paid bribes to AAFES employees, who are considered U.S. government employees, to assist his company, SSRT, in connection with a $206 million contract to provide telecommunication services to AAFES customers. The affidavit further alleges that an AAFES employee attempted to terminate the contract with SSRT for poor performance, but supported the contract after receiving payments from Jeong.

This case is being prosecuted by Senior Trial Attorney Richard C. Pilger and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, headed by William M. Welch II, Chief. The case was investigated by the Air Force Office of Special Investigations, the FBI and the Internal Revenue Service, Criminal Investigation.

A criminal complaint is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

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08-1042

update

PYEONGTAEK, South Korea — Former AAFES official H. Lee Holloway has confessed to federal agents that he took bribes to help a complaint-ridden Internet company keep its lucrative business on U.S. military installations in South Korea, according to documents unsealed Monday in Dallas federal court.

The bribes — including money spent on prostitutes, dining, drinking and travel — were paid or approved by South Korean businessman Jeong Gi-hwan, chief executive of Samsung Rental Corp. Ltd., also known as SSRT, according to the documents filed with U.S. District Court for the Northern District of Texas.

The reference to Holloway’s alleged confession comes in an affidavit accompanying a criminal complaint accusing Jeong of bribing two Army and Air Force Exchange Service officials — Holloway and Clifton W. Choy — so that SSRT could hold a $206 million contract to provide home Internet and phone services. Choy, who’d been with AAFES 36 years, died of heart failure in August in Hawaii at age 56, at a time when he faced possible federal prosecution in the case.

Federal agents arrested Jeong, 44, last week in Dallas and are holding him on bribery and conspiracy charges involving the AAFES contract.

The affidavit cites evidence gathered in a South Korean police investigation. That probe found that bribes were allegedly paid to Holloway on at least 20 occasions from May 2003 to April 2005, when he was AAFES general manager at Osan Air Base.

At one point, Holloway moved to end AAFES’ relationship with SSRT because of customer complaints of poor service, the affidavit says.

But “after the payments from SSRT began, he consistently exerted his official influence as an AAFES manager to benefit SSRT in continuing its contractual relationship with SSRT,” the affidavit states.

Holloway resigned in January 2007 after 17 years with AAFES “to avoid separation,” according to the affidavit. The resignation came at a time when the U.S. Air Force Office of Special Investigations was looking into the bribery allegations.

The bribes paid to Holloway amounted to about $68,000 in cash and about $8,800 in expenses for the prostitutes, dining, drinking and travel, the affidavit says.

Holloway has declined to be interviewed by Stars and Stripes.

Jeong’s Dallas attorney, Michael Levine, could not immediately be reached for comment Tuesday morning.

However, in an Associated Press story datelined Dallas, Levine denied the allegations and said Jeong was a victim of “extortion.”

“This was extortion pure and simple, on the part of the American AAFES employees,” the AP quoted Levine as saying.

“It’s not what it looks like,” said Levine. “He (Jeong) was approached and these funds were demanded of him. Otherwise everything he worked so hard for would have been lost.”

Jeong also paid more than $100,000 in bribes to Choy, according to the Korean police investigation cited in the affidavit. The payments came on at least 19 occasions from October 2001 to August 2005, as well as an additional sum of about $16,000 in expenses for prostitutes, dining, drinking and travel, according to the affidavit.

The bribes to Choy were “all in exchange for official action to benefit SSRT,” the affidavit says.

He had been services program manager at AAFES Pacific headquarters on Camp Foster, Okinawa, from February 2005 until February 2007. AAFES fired Choy in February 2007 “in connection with receiving gifts, gratuities, and bribes” related to the contract, the affidavit says.

Choy “consistently exerted his official influence as an AAFES regional service business manager” to help SSRT win the big AAFES contract, then keep it, according to the affidavit.

The affidavit also contains allegations that Choy “orchestrated” the award of the contract to SSRT, partly with the help of John Patrick Mulligan. Mulligan had worked for a telecommunications firm and had valuable insights into contracts with AAFES in South Korea and Japan, the affidavit said.

He admitted to federal agents that he had hatched a secret deal to help SSRT in exchange for an estimated $3 million over “a term of years,” according to the affidavit.

He allegedly received $60,000 in payments from SSRT, one of which was a “success reward” paid shortly after it won the AAFES contract. And he admitted that he had not reported any of the payments as taxable income, the affidavit says.

When SSRT and other firms were bidding for the contract, Choy phoned Mulligan just before AAFES was going to award the contract and said that SSRT’s bid amounts were unrealistically low and unlikely to win, according to the affidavit.

Mulligan, at Choy’s direction, phoned an SSRT employee with word that the bidding amounts should be raised. The employee passed the word to Jeong, and, on Choy’s direction, SSRT faxed a revised set of figures to the AAFES contracting office on Okinawa shortly before the bidding deadline, according to the affidavit.

The revised figures upped all of SSRT’s proposed fees, some by as much as 100 percent, according to the affidavit.

U.S. prosecutors now must seek a federal indictment against Jeong.

In South Korea’s Suwon District Court in January, Jeong was convicted of interfering with foreign trade for bribing AAFES officials in connection with the SSRT contract.

SSRT was forced in January 2007 to transfer the rights to its AAFES contract to LG Dacom, the firm that currently holds it.

http://www.stripes.com/article.asp?section=104&article=59072

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