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Biz News Korea(Eng)

DSME management commits systematic accounting fraud to ensure fat bonus: prosecution

Collected: 2016.06.27

Distributed: 2016.06.28

Source: Go Direct

Troubled state-invested Daewoo Shipbuilding and Marine Engineering (DSME) cooked books systematically under the order of top management and hid losses worth 5.4 trillion won ($4.5 billion) from 2012 to 2015 to treat themselves with fat bonuses and compensations. The wrongdoings were committed under Ko Jae-ho, former DSME chief executive.

According to the special investigation team, testimonies from employees in charge of accounting matched the allegations that the top managers were all involved in window-dressing in order to hide losses and keep up performance to ensure their year-end bonuses.

Prosecutors discovered that the shipbuilder adjusted expenditures in building vessels and deep-sea platforms to inflate sales and operating profit figures. Their scam in the form overstating the value of orders secured at cheap price, cooking profit figures, handing out bonuses based on inflated sales and profit numbers, and transferring the manipulated cost to other projects went on for years.

For example, DSME would win an order for a typical $1 trillion won vessel at 800 billion won and write down it as 700 billion won in its ledger. It further manipulated the book to make it look like the order generated a profit.

The special investigation team called what DSME committed for years was outright accounting fraud in order to fool lenders and bond and stock investors to ensure their fat paycheck and warned of strong punitive actions for its breach of trust and disruption in economic order.

By Lee Hyun-jung and Kim Se-woong

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