Supreme court sentences ex-DSME chief to 9 years in prison
Former Daewoo Shipbuilding & Marine Engineering CEO Ko Jae-ho speaks to reporters at the entrance of Seoul District Public Prosecutors' Office on July 4. / Yonhap
By Jhoo Dong-chan
The Supreme Court upheld a nine-year prison sentence on Ko Jae-ho, former CEO of Daewoo Shipbuilding & Marine Engineering (DSME), Sunday, on charges of accounting fraud totaling 5.4 trillion won ($4.69 billion).
The court said it dismissed Ko’s appeal, confirming the lower court’s verdict to imprison him for dereliction of duty.
“Ko orchestrated the shipbuilder’s financial statements and business plans for the fiscal year from 2013 and 2014 to cover up the company’s mounting deficits,” the Supreme Court said in its ruling.
“The court, therefore, has decided to confirm the lower court’s verdict in pronouncing him guilty for accounting fraud and other charges.”
Along with Ko, the Supreme Court also confirmed the original verdict that sentenced former DSME chief financial officer Kim Gap-jung to six years in prison on the same charges. Kim was in charge of accounting under Ko, and he told prosecutors that Ko ordered him to fabricate the financial statements.
The 62-year-old Ko was arrested for fabricating the company’s financial statements while he was heading the ailing shipbuilder between 2012 and 2014. He was one of two people involved in the alleged mismanagement of the troubled shipbuilding company, alongside his predecessor Nam Sang-tae, who was arrested June 29.
Prosecutors suspect Ko committed accounting fraud worth 5.4 trillion won by underreporting production costs and exaggerating profits expected from the company's overseas plant building and shipbuilding projects during his three-year term.
According to the prosecution, DSME fraudulently reported that it made a 440 billion won profit in 2013 and a 471 billion won profit in 2014, but the company later admitted it actually suffered losses of 778 billion won and 742 billion won, respectively, citing accounting misreporting.
In the meantime, the company borrowed a total of 4.9 trillion won along with receiving a refund guarantee worth 10 trillion won from financial institutions by using fabricated statements.
With such fraudulent figures, the shipbuilder allegedly issued corporate bonds and promissory notes, incurring tens of trillions of won in losses for investors and creditors. The company used part of the fraudulently calculated profits to pay some 500 billion won in employee bonuses. The prosecution suspects Ko approved it.
In June, the Board of Audit and Inspection (BAI) reviewed orders for 40 offshore plants won by DSME and said the company was suspected of accounting fraud to cover up 1.5 trillion won in losses from 2013 to 2014.
Prosecutors suspected the amount of the fraud would be much higher, up to 5.4 trillion won, and are looking into 500 orders since 2006.
Earlier this month, the Seoul court sentenced Nam to six years in prison for similar charges.
The Seoul Central District Court handed down a guilty verdict on the 67-year-old, convicting him of accounting fraud, embezzlement, breach of duty and bribery.