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South Korea prosecutors launch probe into allegations that Korean Air executive took payment from Airbus

SEOUL (Reuters) – South Korean prosecutors on Thursday launched a probe into allegations that Korean Air’s <003490.KS> CEO and his sister are responsible for a former executive’s taking payments from Airbus <AIR.PA> in return for buying that company’s aircraft.

This year, Airbus said it would pay a record $4 billion in fines after reaching a plea bargain with prosecutors in Britain, France and United States over accusations of bribery and corruption stretching back at least 15 years.

A French document detailing Airbus’ settlement said Airbus had agreed to pay 15 million euros ($1.07 million) to a former top Korean Air executive in return for the airline’s purchase of 10 A330 jets under contracts dating 1996-2000, then delivered part of the cash through a fake consulting contract using a middleman.

“(Airbus) delivered rebates worth a total of 17.4 billion won on three occasions from 2010 to 2013 to the Korean Air side,” the civic group People’s Solidarity for Participatory Democracy said on Wednesday as it reported the allegation to prosecutors.

The civic group said Hanjin Group chairman Walter Cho and his sister, Heather Cho, directors of Korean Air at that time, should be charged with breach of trust and embezzlement because they were involved in the purchase of aircraft and the payments.

A Seoul Central District Prosecutor’s Office spokesman said the office has launched an inquiry into the matter, without elaborating.

Walter Cho and other current Hanjin Group executives said they had nothing to do with the Airbus payments, Korean Air said in a statement, speaking for Cho.

Korean Air has recently requested information from Airbus to check past facts, plans to conduct an internal audit and take legal action if needed, it said.

However, “we will not sit idly by and watch actions that negatively affect the company’s value by defaming the current management without grounds, and we will also seek civil and criminal measures,” Korean Air said.

Heather Cho said in a statement through her lawyer that she was not involved in any illegal decision-making, and will cooperate in clarifying the facts.

Walter Cho and Heather Cho are locked in a proxy fight in Korean Air’s parent firm, Hanjin Kal <180640.KS>, before a March 27 annual general meeting, when shareholders will vote on who leads the conglomerate.

(Reporting by Joyce Lee and Heekyong Yang. Editing by Gerry Doyle)