Daewoo Shipbuilding raided over alleged accounting fraud

Prosecutors raided Daewoo Shipbuilding & Marine Engineering Co. (DSME), one of the country's top three shipbuilders, on Wednesday over alleged accounting fraud and poor management amid an industrywide slump.

The Supreme Prosecutors' Office said it dispatched some 150 investigators to raid the company's headquarters in central Seoul and its Okpo Shipyard on Geoje Island off the southern coast.

State-run Korea Development Bank, the largest shareholder of the shipyard, as well as Deloitte Anjin LLC were also included in some 10 organizations raided Wednesday.

Prosecutors said they confiscated computer hard drives, accounting books and related documents, as allegations have emerged that the company's former executive board was involved in a string of corrupt acts and even tried to hide poor management results.

The shipbuilder has been under pressure from its creditors, led by state-run Korea Development Bank (KDB), to come up with a stronger rehabilitation scheme to tide over a protracted slump in the global shipbuilding segment and mounting losses.

The country's top three shipyards, which also include Samsung Heavy Industries Co. and Hyundai Heavy Industries Co., suffered a combined operating loss of 8.5 trillion won ($7.3 billion) last year due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump.

A huge chunk of the loss, some 5.5 trillion won, came from the DSME.

Prosecutors have already put travel bans on Nam Sang-tae, who headed the company from 2006 to 2012, and Ko Jae-ho, who succeeded Nam until last year, to question them over the losses.

"A huge sum of public funds has been put into the company, and state-run KDB actually intervened in the management as the largest shareholder," a senior prosecutor said on the condition of anonymity. "A thorough investigation, equivalent to something that would be carried out on a public enterprise, is needed."

In January, the audit committee of Daewoo Shipbuilding filed a petition with the Seoul Central District Prosecutors' Office and the Changwon District Prosecutors' Office seeking an investigation into the former managing board's responsibility in poor management.

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

Some 420 shareholders have raised compensation suits against the company and its former CEO Ko with the Seoul Central District Court since September. The total amount of compensation sought hovers around 25 billion won, according to legal sources.

The plaintiffs said they bought the stocks after believing the shipyard's fake business reports that stated it made profits worth more than 400 billion won every year, according to the sources. (Yonhap)