[photo :Allianz remodeling of training center was clearly shoddy and fault construction, typical corruption of our society like irrational selecting construct company of management]
Failure of anti-corruption & open and aboveboard management – Personal profit being the first, public profit being the second
Allianz Life Korea carried out the remodeling of training center located in Bongmu-ri, Namsa-myun, Yongin during 12.1st 2006~ 3.31st 2007. Mostly over 100 millions construction case, company should select construction company to fit in the certain conditions of company’s guideline.
But the company hired the small Daeim Total Construction Inc. that did not match with the company’s guideline for the 5.4 billions big remodeling project by ‘ illegal agreement’ and violated the Regulation of monopoly and oligopoly and Fair Trade Law and aroused suspicion of making the small Daeim Total Construction Inc. receive an order of the remodeling project at 4.8 billions won. (Referring the written accusation submitted to Seoul South District Court Seoul, 2007.11) Allianz Life Korea making mutual agreement of the building company pumped up a bill of construction cost and facilities’ prices. It was also formal supervision of the construction. On this process, they got billions of personal profits and Allianz got losses the same.
The company’s losses came back to shareholders (investors), customers (consumers) and employees (laborers). Even more, it caused severe fault construction of training center and additional costs for defects after the remodeling.
Allianz Life Insurance provides a valuation and selecting guideline of Construction Company on purchasing RGP as follows.
4.1. Valuation of Construction Company goes for negotiation according to the 4.1.1 or 4.1.2 guidelines of price, quality, service, technique and financial soundness.
4.1.1. Purchasing amount under 50 million won needs more than 2 companies’ estimate, Purchasing amount over 50 million won needs more than 3 companies’ estimate. Purchasing amount over 100 million won needs to progress multi companies’ competition.
4.2. Selection of Construction Company is computed by the standards of article 4.2.1 or the clause 4.2.2.
4.2.1. Select the lowest price under the same conditions.
4.2.2.If it is difficult to select the lowest price, Select the company by establishing a proper standard considering of qualities, services, techniques, financial soundness, contribution to Allianz, estimate prices.
And, According to purchasing RGP of Allianz Life Insurace, there are factors to write out the candidates list like below.
7.1. After completing the clause 15.0 normally, buyer makes lists of estimates’ companies with the standards bellow using the industry years of purchasing items, purchasing association, internet, buyer’s self-acquired information and other department’s information.
7.1.1. The existing company with corresponding business results over 100 millions won of year and excellent past results or excellent financial soundness, or
7.1.2. A company within sales ranking 30th passing over 3 years in their business and sustaining sound financial status past 3 years, or
7.1.3. A company having records of delivering goods to foreign company over past 3 years and excellent financial soundness
7.1.4. A company recommended by buyers sustaining sound financial status past 3 years
According to above company’s guidelines, it has to be considered price, quality, service, techniques, financial soundness and contribution to the company to select the constructer. But only the lowest price was considered in above remodeling project not quality, service, techniques, financial soundness and contribution to the company were considered which were also important.
Daeim Total Construction Inc. making a successful bid at 4.8 billions won for 5.4 billions remodeling of training center had 2.4 billions won of total assets, 1.31 billions of capitals and 4.9 billions total sales of 3years between 2003 and 2005 far from the remodeling amount. And Daeim Total Construction Inc. with 15 employees was small size and low assets compared to the size of remodeling construction, and had no business records with Allianz, even no records of remodeling constructions so its quality or techniques of remodeling constructions were not proved at all. Though it was made up to have multi round competitions in selecting the constructor, all 6 companies of multi round competitions were the partly in Kyungki-Do, putting in a rigged bid was still possible.
Woojung C&C supervising of remodeling in Seocho-Gu was owned by university fellow pupil of YUN Jae-Hoon who was submitted to a disciplinary measure about remodeling of training center. So there was a suspicion that selecting supervisory company was also connected to the defendant YUN Jae-Hoon, poor supervision of remodeling caused many flaws. ‘Internal audit’ of above remodeling of training center found that 800 ~ 1000 millions won was paid for the exaggerated construction cost or facilities’ prices. Over appropriating and paying of construction cost was confirmed by union lawyer interviewing the audit department. The audit department had no authorization of tracing accounts so couldn’t find the all money flow and use, the audit department after internal audit through legal consults dismissed the director of general affairs P who was in charge of above remodeling and requested the dismissal of K manager of purchasing department and Y vice assistant chief who conducted and supervised the remodeling construction to the company
As Allianz Union checked the results of remodeling training center, they found many flaws concerned with remodeling construction. BA World Plus Inc., the managing facilities company of training center required to mend flaws of 85 items on August 31st 2007 and seeing the photos of remodeling flaws by BA World Plus Inc., the shoddy and fault construction of training center could not be overlooked.
Like above, Allianz remodeling of training center was clearly shoddy and fault construction, typical corruption of our society like irrational selecting construct company of management, exaggerated construction expenses, absurd supervision of construction caused it. Shortly, the management of company using their positions misappropriated the customers’ money and it was a case of ‘ Corporate Social irresponsibility’
About this problem, the company announced “ Information for customers about union’s claim regarding with training center remodeling (finished on March 2007)” on April 25th 2008. The company refuted, “union’s claim of reckless management of customers’ assets in training center remodeling was not true” [deny]. So, the construction expenses came from where? The company explained “ Allianz Life Korea increased the capital of 150 billions won for rising BIS, investing IT infra, education from German Headquarter on March 2006, 5.4 billions of that capital was used for remodeling of training center” [distort]. And the company explained that they conducted internal audit for the suspicions of construction risen by union on March 2007 and found problems like ‘over appropriating expenses’, ‘fault construction’ and ‘flaws after remodeling’ and submitted concerned persons to disciplinary action. [divide, dominate]. Specially, the company stated that they sued the construction company for 185 millions won of exaggerated construction expenses in damages. [deny, deceive]. And the company ended that they would be “ the company of thinking customers of our top priority”.
Interestingly, document conflicting with above announcement was found in ‘CEO message’ of Manuel Bauer the last president on March 2006. That massage stated that German Headquarter would invest 150 billions won to prepare for the strong ‘BIS standard’ of FSS scheduled in 2007. And the message stated, “with this money the company would invest in securities to increase bonds’ portfolio duration” and the company already got approval of Headquarter. And predicted that Doing it would increase the financial stability, BIS up to 200% and improve returns rate of asset management. The company’s choice was conceited “Allianz Life Korea should act as a good enterprise for people”. The message last emphasized, “ Union, employees and management have to work with cooperation”
A decisive question is rising here. In ‘CEO message’ of 2006 March, the additional invested money was “for investing in securities to increase bonds’ portfolio duration” but in ‘message for customers’ of 2008 April, the money was “for rising BIS, investing IT infra, education”. [deny, deceive] Investing in securities is clearly not same with investing in education. The company has a responsibility to explain the difference of both. And also has to explain the relevance of rising BIS and investing in education.
Meanwhile, the company explained that as a result of internal audit, they submitted concerned persons to disciplinary action for ‘over appropriating expenses’, ‘fault construction’ and ‘flaws after remodeling’, but did the management really not know about this before internal audit? (That was conducted hurriedly just because of union’s expression of suspicions) [delay, distort] This part makes us wonder that observing ‘ethical standard’ is only for employees and customers but the management is the exception. Pretending not to know, blaming others and making ‘victims’ without confessing truth [divide, dominate] seemed difficultly to be the act of ‘ self-responsibility’ or ‘civil enterprise’. Can “Union, employees and management work with cooperation” in these circumstances? To pursue ‘sustainable development’ without ‘ethical sustainability’ will cause not coexistence and coprosperity but collapse of itself.
These situations are not matching with not only the ethical management slogan of ‘ Allianz Insurance, leading sound and justifiable culture of corporate ethics’ but also the guidelines of ‘Fairness’ and ‘Observation of Law’. And these situations are completely not matching with the action principle to use ‘Allianz Whistle’ for “the illegal and unfair business”.
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