Ex-CEO of Daewoo Shipbuilding indicted over accounting fraud

SEOUL, July 27 (Yonhap) — Prosecutors indicted a former head of Daewoo Shipbuilding & Marine Engineering Co. on Wednesday on charges of cooking the books to inflate assets by some trillion won and getting loans using faked financial statements.

The Seoul Central District Prosecutors’ Office said Ko Jae-ho is being charged with fraud, breach of trust, as well as violating the Financial Investment Services and Capital Markets Act and the Act on External Audit of Stock Companies.

The 60-year-old, who headed the company from 2012 to 2015, allegedly overreported some 5.7 trillion won (US$5 billion) in terms of net assets from 2012 to 2014 by under-reporting the production cost or neglecting losses suffered by the firm’s affiliates.

Based on the higher credit rating unlawfully earned by doctoring its books, the shipyard allegedly received some 21 trillion won worth of loans between 2013 and 2015, according to prosecutors.

Prosecutors said its employees received a total of 496 billion won of bonuses during the period based on the exaggerated figures, when the shipbuilder was in fact suffering from losses.

“We have mostly covered the accounting fraud committed during Ko’s management period, but we are still looking into other irregularities,” a senior prosecutor said, asking not to be named.

Last week, the prosecution indicted Ko’s predecessor Nam Sang-tae. The investigation team said they could slap additional charges on the fomer CEOs following their probe result.

Earlier this year, the shipyard said it swung to huge losses in 2013 and 2014 from earlier reported profits, citing accounting mishaps.

The Board of Audit and Inspection, the country’s state auditor, has said the shipyard is suspected of rigging its books to hide up to 1.5 trillion won in losses between 2013 and 2014.

The shipyard, along with two other major South Korean shipbuilders, are currently undergoing self-created debt-restructuring plans in the face of a decrease in new orders caused by the protracted global economic slump.

Ko Jae-ho, who headed Daewoo Shipbuilding & Marine Engineering Co. from 2012 to 2015, answers questions from reporters as he arrives at the Seoul Central District Prosecutors’ Office in southern Seoul on July 4, 2016, for questioning over the financially troubled firm’s alleged accounting fraud and poor management. Prosecutors indicted him on July 27.