Ex-STX chief gets 6 years for fraud

Former STX Group chairman Kang Duk-soo was sentenced to six years in prison for incurring huge losses to business units, financial firms and investors by rigging the conglomerate’s financial statements and pocketing company funds.

The Seoul Central District Court ruled on Thursday that Kang, 64, took the initiative in committing the debt-ridden group’s irregular bookkeeping worth 584.1 billion won ($556.2 million) and embezzlement worth 67.9 billion won.

The figures were much smaller than the charges raised by the prosecution, which had claimed Kang’s accounting fraud and embezzlement reached 2.3 trillion won and 340 billion won, respectively.

The prosecution in early October asked the court to sentence him to a 10-year jail term.

In its verdict, the court said that the former STX chief “dealt a critical blow to financial firms by committing fraudulent accounting, which undermines trust and transparency in the capital market.”

Between 2008 and 2012, some financial firms, which were duped by the shipbuilding and energy-oriented group’s deceptive financial statements, were found to have approved the loans requested by Kang and some executives.

The verdict also said that “small investors of STX Offshore & Shipbuilding, who had trusted the rigged financial statements, failed to recoup their investments as the company was delisted from the stock market due to capital erosion.”

Judges clarified that units of the group suffered heavy damages in the wake of Kang’s irregular intragroup trading.

They said, however, that the irregular business practices seemed to be targeted at the embattled group’s normalization rather than for major shareholders’ private benefit.

In addition, the court said it had accepted a petition pleading for mercy that was jointly filed by 83 CEOs of subcontractors of STX Group.

Aside from the ex-chief, the court also handed the conglomerate’s former vice chairman, surnamed Hong, a prison term of three years for his involvement in the malfeasance.

Four more ex-senior executives were sentenced to suspended prison terms.

The group’s senior chief financial officer, surnamed Byun, was given a jail term of 2 1/2 years with a four-year suspension, and STX Corp.’s management strategy chief, surnamed Lee, was given 2 1/2 years with a three-year suspension.

Sentences on STX Offshore & Shipbuilding’s former CFO, surnamed Kim, and STX Construction’s former CFO, surnamed Kwon, ranged between one and two years with probation of two to three years.

The shipbuilding conglomerate, which has 10 business units, has undergone financial turmoil due to liquidity shortages and huge debts, apparently caused by the global downturn in the shipbuilding and shipping sectors.

Kang was a larger-than-life businessman who began his career as a salaried employee at a cement manufacturing unit and fostered STX Group as one of the nation’s 15 biggest conglomerates. But the group was driven from the elite group after the liquidity crisis and malpractice scandal.

By Kim Yon-se (kys@heraldcorp.com)