Hanwha Ocean accuses rival shipbuilder's executives of espionage as bidding war heats up

Hanwha Ocean accused HD Hyundai Heavy Industries of orchestrating the illegal collection of military secrets, calling for a police investigation.

Gu Seung-mo, a lawyer under Hanwha Ocean's compliance division, speaks during a press conference in central Seoul on Tuesday. [NEWS1]

Hanwha Ocean, Korea’s major shipbuilder, lodged a police complaint against its rival HD Hyundai Heavy Industries (HD HHI) alleging that its executives were responsible for a convicted breach of military secrets, including Hanwha Ocean’s warship design.

In the complaint, which was filed Monday, Hanwha Ocean called for a police investigation as well as the imposing of penalties against HD HHI and its executives whom the shipbuilder accuses of having orchestrated and engaged in unlawful activities in 2013.

“It is apparent based on the court ruling that such illegal conduct would have been impossible without the involvement of management,” said Gu Seung-mo, a lawyer under Hanwha Ocean’s compliance division, during a press conference Tuesday in central Seoul.

During the press conference, Hanwha Ocean presented evidence that it claims proved the direct involvement of HD HHI’s management in the illegal collecting of military secrets. Police evidence and transcripts of police interviews compiled by Hanwha Ocean portray HD HHI employees admitting that their superiors were aware of and approved the illegal collection of military documents.

“In the defense industry that determines a country’s military power, the issue of security holds great significance,” said Gu, stressing that “illegally collecting military secrets with an organized effort over the course of several years, storing them in unauthorized servers and sharing them is an unprecedentedly grave and significant breach of law and a severe security failure.”

Last November, nine HD HHI employees were found guilty of unlawfully obtaining and disseminating military documents, including crucial conceptual designs for the Korean Next-Generation Destroyer of Hanwha Ocean, then Daewoo Shipbuilding & Marine Engineering, in 2013.

Hanwha Ocean and HD HHI are likely to compete for an upcoming 7.8 trillion won ($5.8 billion) bid from Seoul's Defense Acquisition Program Administration (DAPA) to build new stealth guided-missile destroyers for the Korean Navy. Bidding is set to open in the latter half of this year.

Hanwha’s latest move follows state arms procurement agency's Feb. 27 decision to impose “administrative guidance” measures rather than bidding restrictions, which gave HD HHI the green light to join the race. DAPA cited a lack of evidence proving top executives’ involvement in the illegal acts for its decision.

While stressing that “we are not saying that DAPA’s decision was wrong,” Gu urged further investigation on the matter, adding that “without appropriate rules applied, similar incidents will occur again, which will not only lead to unfair practices but also pose a severe challenge to the country’s exports.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]