South Korea’s biggest institutional investor National Pension Service (NPS) posted losses of 241.3 billion won (212.6 million) from investment in Daewoo Shipbuilding & Marine Engineering Co. (DSME)’s stocks and bonds in the recent three years, according to the finding of the country’s lawmaker.

Citing the pension fund’s data, Rep. Jung Chun-sook of the Minjoo Party of Korea said on Friday the NPS that has invested a total of 1.55 trillion won into the struggling shipbuilder from 2013 to March of this year faced losses of 241.2 billion won from the investment.

Most of the losses came from DSME stocks, according to the finding. The NPS bought 1.15 trillion won worth of DSME stocks, which led to a loss of 236 billion won. The NPS also bought 398.8 billion won worth of DSME bonds, which led to a loss of 5.2 billion won.

The pension fund increased its interest in the shipbuilder to 9.12 percent in 2013. But the NPS started to reduce its interest in DSME in June 2015 when DSME’s book-cooking scandal roiled the market. It sold off all of its shares in the debt-ridden shipbuilder through two separate trades - one on 16 July last year and the other on 30 April this year, but its losses snowballed because the shipbuilder’s stock price has already plunged since July last year.

On Wednesday, the NPS decided to file a lawsuit against DSME and the shipbuilder’s auditing company Deloitte Anjin to seek financial compensation of 48.9 billion won, saying the shipbuilder’s illicit window-dressing caused its losses.

DSME facing the government-led restructuring is currently under probe by the country’s prosecution for accounting fraud that the shipbuilder is alleged to have committed for several years to hide losses. DSME this year revised its 2013 and 2014 earnings reports, admitting it had incurred 2.6 trillion won losses in the two years instead of profits it previously had disclosed.

The losses imposed on the NPS, the world’s third largest pension fund with about 520 trillion won in assets, reaches 241.2 billion won, which is equivalent to annuity payment for 710,000 Korean policy holders (338,680 won per month), said the lawmaker. “The NPS is seeking only partial compensation of 48.9 billion won.”

The NPS lawsuit is expected to trigger a string of lawsuits from institutional investors who relied on false financial data disclosed by the shipbuilder to invest. Minority shareholders of DSME already filed a lawsuit against DSME and its accounting firm.

By Kim Hyo-hye

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