DJ Kuwait Probes Suspected Graft In Privatization-bound Airline

(This item was originally published Tuesday.)

KUWAIT CITY, Kuwait (AFP)--Kuwaiti Communications Minister Mohammad al-Baseeri said Tuesday he has formed a committee to probe allegations of widespread corruption in Kuwait Airways Corp., which is soon to be privatized.

"Last week, I formed a committee to investigate alleged financial and administrative violations in KAC. I gave the panel two months to complete the probe," Baseeri told the Kuwaiti Parliament during a debate.

Baseeri, whose ministry has responsibility for the airline, acknowledged "administrative corruption and financial wrongdoing" in the loss-making national carrier, which parliament voted two years ago to privatize.

The minister vowed to refer the findings of the investigation to the public prosecutor for criminal action.

Several lawmakers charged that many violations have been committed by KAC management, especially in the past two years when the legislation was passed to privatize the carrier.

"There has been a programmed theft of KAC so it will be sold at a very cheap price. KAC has become an example for corruption," opposition lawmaker Saifi al-Saifi said.

Under the privatization law, KAC will be transformed into a private company with a 35% stake to be sold at auction to foreign or local investors and 40% to be sold to Kuwaiti citizens in an initial public offering.

Some 20% will be reserved for state-run institutions and the remaining 5% will be distributed for free to the Kuwaiti employees.

The law stipulates that the privatization process must be completed within a period of two years, which ends later this month.

Two foreign consultancy firms have evaluated the assets of the airline and its subsidiaries.

The airline, which has incurred almost $2.5 billion in losses during the past 19 years, has repeatedly come under fire from lawmakers, who have accused it of squandering public funds.

The airline has a fleet of 15 Airbus and two Boeing Co. (BA) aircraft which it bought in the early 1990s.

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March 02, 2010 22:47 ET (03:47 GMT)