Prosecutors raid Daewoo Shipbuilding in fraud probe

Agence France-Presse

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Prosecutors raid Daewoo Shipbuilding in fraud probe

EPA

Daewoo Shipbuilding and Marine Engineering (DSME) is accused of manipulating financial statements in 2013 and 2014 to hide losses totaling $2 billion

SEOUL, South Korea – Prosecutors on Wednesday, June 8, raided Daewoo Shipbuilding and Marine Engineering Company, one of South Korea’s 3 giant shipbuilders, as part of a probe into a $2 billion accounting fraud.

Some 150 staff from the Supreme Prosecutors’ Office stormed DSME headquarters in Seoul and its Okpo shipyard on the southern island of Geoje, the company said.

“This morning, they started collecting accounting books, computer hard disks, and other documents,” a spokesman for the company told AFP.

DSME faces allegations it manipulated its financial statements in 2013 and 2014 in order to make it appear financially healthier than it really was.

Prosecutors have imposed travel bans on former CEO Nam Sang-Tae, who led the company from 2006 to 2012, and Ko Jae-Ho, who succeeded him until last year.

In January, auditors filed a petition with prosecutors calling for a probe into suspected accounting irregularities.

More than 400 shareholders have also launched a lawsuit against the company and Ko claiming $21 million in compensation for losses suffered when the firm’s shares fell because of the alleged fraud.

DSME is accused of hiding $2 billion of losses from 2013 and 2014.

Auditors argue the shortfall was then factored into its 2015 accounts, when the company reported a 5.1 trillion won ($4.4 billion) net loss – 6 times higher than the previous year.

DSME and two other South Korean shipbuilding giants – Hyundai Heavy Industries and Samsung Heavy Industries – have enjoyed a decade of almost uncontested global dominance.

But a prolonged slump in oil prices and the global economic slowdown has sapped demand for tankers and container ships, while overcapacity, regional rivalry, and competition from cheaper Chinese shipbuilders has squeezed profit margins. (READ: Crisis for South Korea shipbuilders as golden age fades)

After racking up a collective loss of 8.5 trillion won last year, the 3 shipbuilders have come under pressure from the government and creditors to come up with restructuring plans to keep themselves afloat.

Minister of Finance and Strategy Yoo Il-Ho said Wednesday the companies had decided to raise a total of 10.3 trillion won through asset sales and cuts in jobs and wages.

DSME plans to raise 5.3 trillion won by selling all its 14 subsidiaries, downsizing facilities, reducing wages, and laying off employees, the finance ministry said. – Rappler.com

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