KT Corp., South Korea’s largest telecommunications operator, will pay $6.3 million in a settlement with the Securities and Exchange Commission (SEC) for violations of the Foreign Corrupt Practices Act (FCPA).

KT agreed to pay approximately $3.5 million in civil penalties and $2.8 million in disgorgement, the SEC announced Thursday. The company neither admitted nor denied the agency’s findings in reaching settlement.

KT violated the books and records and internal accounting controls provisions of the FCPA when it “engaged in multiple schemes to make improper payments” in the Republic of Korea and Vietnam, according to the SEC. The company was further faulted for having no anti-corruption policies or procedures concerning donations, employment candidates, vendors, subcontractors, or third-party agents.

Korea bribery schemes: From at least 2009 through 2017, KT executives “maintained slush funds, comprised of both off-the-books accounts and physical stashes of cash, in order to provide items of value to government officials,” the SEC’s order stated. “These included gifts, entertainment, and, ultimately, illegal political contributions to members of the Korean National Assembly serving on committees relevant to KT’s business.”

From 2009-13, a former KT executive and another senior executive orchestrated a scheme in which slush fund amounts were booked as executive bonuses, “even though the money was used for gifts and for payments to government officials,” the order stated.

When media reports revealed the scheme in 2013, KT officials allegedly devised a new method to continue generating a slush fund by purchasing gift cards, which—through colluding with a particular vendor—were then converted to cash and used for a new slush fund.

“KT booked the gift card expenses used to fund the slush fund as either ‘research and analysis’ or ‘entertainment,’” according to the SEC. This alleged activity occurred from 2014-17.

In November 2021, South Korean authorities indicted KT and 14 executives for criminal violations related to illegal political contributions from the slush funds.

Additionally, between 2015 and 2016, KT made more than $1.6 million in payments to three organizations at the request of high-level government officials, according to the SEC.

“KT took no steps to determine if the payments were legitimate donations, rather than illicit payments made at the behest of government officials,” the agency’s order stated.

Vietnam bribery schemes: Between 2014 and 2018, KT employees internally discussed providing money to third parties connected to government officials in Vietnam in exchange for contracts for two projects, according to the SEC. The first was a solar power project with the People’s Committee of Quang Binh province in Vietnam, and the second was with the Vietnam Ministry of Labor, Invalids, and Social Affairs to provide hardware, software, and training for five vocational colleges.

“At the time, KT lacked sufficient internal accounting controls regarding third parties and (had) no relevant compliance policies regarding due diligence,” the order stated. “Moreover, KT took no meaningful steps in response to allegations of improper payments in connection with the contracts.”

Cooperation and remediation: While KT did not self-report the alleged violations, it did cooperate with the SEC’s investigation by providing translations or summaries of some relevant documents, certain facts developed in its own internal investigation, and making certain current and former employees available to the agency staff, the SEC noted.

KT further terminated certain employees responsible for the alleged misconduct and enhanced its internal accounting controls, code of conduct, policies and procedures regarding expenses, and anti-bribery training.

“KT continues to remediate its process around anti-corruption risk assessments, the effectiveness of its audit program, and other internal accounting controls relating to third parties and procedures for regular testing of its internal accounting controls,” the order stated.