Prosecution summons Daewoo Shipbuilding's CFO over account fraud

By Kim Bo-eun

Kim Youl-jung

The prosecution summoned Daewoo Shipbuilding & Marine Engineering (DSME) chief financial officer (CFO) Kim Youl-jung, Friday, for questioning over the incumbent executives’ alleged accounting fraud amounting to 120 billion won ($108 million) to cover up the company’s operating losses.

The findings show cooking the books took place under the current management, which has pledged to clean up the irregularities that the former management had been involved in.

The summons comes two months after a special investigation team within the prosecution raided the company’s headquarters in June.

The team found evidence backing the allegation while examining the company’s accounting records for 2015, which were finalized between January and March this year.

DSME is suspected of having underreported its losses in order to continue receiving aid from creditors and avoid disadvantages in the stock market which are given to companies with large capital erosion.

Lower-level employees at the company involved in the accounting fraud have acknowledged the fraud, the team said.

Following Kim, CEO Jung Sung-leep and other executives are expected to be questioned over the allegations.

The findings have sparked a dispute as the current executives pledged to reform the company to root out corruption brought on by their predecessors.

In May last year when Jung took the helm of the company, he pledged to come clean about its poor management. DSME had 5.5 trillion won in losses in its financial statement that year alone.

The company set up an audit committee and requested the prosecution to investigate account manipulation and management irregularities that had occurred during the terms of former CEOs Ko Jae-ho and Nam Sang-tae from 2006 to 2013.

The special team was launched based on this request. It found accounting fraud amounting to 5.7 trillion won during Ko’s term.

Fueling the controversy is the fact that the company is a recipient of government aid for the shipbuilding industry as it has faced a financial crisis amid declining orders due to the global economic slump.

The government announced a plan on restructuring and aid from state-run banks to three major shipbuilders ― DSME, Samsung Heavy Industries and Hyundai Heavy Industries ― in June last year.

Last October, the state-run Korea Development Bank and the Export-Import Bank of Korea injected some 4.2 trillion won into DSME to keep the ailing company afloat, but it has not showed any signs of a rebound.

The government and the banks are expected to face criticism over slack supervision over the company’s management. KDB is also the biggest shareholder of DSME, owning a 49.7 percent stake.

The prosecution may investigate creditors, the financial authorities and government institutions in relation to the case.