Prosecutors on Friday raided the home of a former vice president of POSCO Engineering & Construction Co. (POSCO E&C) over allegations that he helped create a slush fund in Vietnam a few years ago.

Chung Dong-hwa allegedly helped the company's Vietnamese operations stash away about 10 billion won (US$9 million) in a secret reserve between 2009 and 2012, prosecutors said, adding he appears to have transferred 4 billion won back to South Korea.

An internal audit within the company had found the existence of the slush fund earlier this year.

Prosecutors have already arrested the former head of the Vietnamese branch for similar allegations.

They believe POSCO E&C officials at that time exaggerated the amount of money paid to local subcontractors to create the slush fund.

Prosecutors said they are also planning to question several former executive members of POSCO Group, South Korea's No. 1 steelmaker, including former POSCO chairman Chung Joon-yang, who has been banned from leaving the country.

The investigation comes after Prime Minister Lee Wan-koo declared an all-out war on corruption in an apparent attempt to prop up weak public support for President Park Geun-hye. (Yonhap)