A well-rehearsed fraudulent scheme by a now-defunct KOSDAQ company scalded 137 investors across the country including Hyun Jung-eun, chairwoman of Hyundai Group, according to court hearing records.

As many as individuals invested in high-profile environmental projects laid out by ForHuman Co. between 2007 and 2010 and have not recovered losses from their shares that became trash after the company was kicked out of the exchange for accounting irregularities in 2011. They lodged class action against the company’s auditor Samil PricewaterhouseCoopers since its corporate head is behind the bars.

According to court documents on Wednesday, Hyun’s investment amounted to 2.7 billion won ($2.4 million). That time, Hyun believed the company had a great future value and even considered making an acquisition bid. She did not come forward to the press when the scandal blew over, given her position.

Most of the victims were minority investors whose amount was less than 100 million won, but some like Hyun lost more than 1 billion won. They include church elders, restaurant owners and community leaders.

The scandal underscored the immaturity of the Korean stock market. In 2002, ForHuman burst onto the scene as a developer of an innovative device to reduce car emissions dramatically. It was a ghost company with no sales records but it manipulated accounting books to lure investors. Between 2008 and 2010, it lost 16.4 billion won on a net basis, but managed to transform the figure into net profit of 41.4 billion won through window-dressing.

It even established a fake subsidiary in Japan and conducted multiple fraudulent transactions, inflating its market cap to as much as 500 billion won in 2007. With its daily stock trading volumes reaching 1 million shares, the company became part of technology blue chip index.

Questions began to rise about the company from 2008, but its auditor nevertheless approved its financial statement for 2009-2010.

Accounting fraud finally spilled over, burning the shareholders from high-profile entrepreneurs to mom-and-pop store owners.

In Nov. 2013, a court ordered ForHuman’s president and Samil PricewaterhouseCoopers to make restitution payments of 38.4 billion won in total. But the company head, liable for 24.4 billion, claims he is broke.

Samil which was ordered to pay 14 billion won in compensation appealed the court’s decision, arguing it too was defrauded by ForHuman. An appellate court ruling is due to on Nov. 8.

By Moon Il-ho

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