Roundup: Daewoo Shipbuilding's ex-chief summoned amid billions of dollars of accounting frauds

Former chief executive of Daewoo Shipbuilding & Marine Engineering, one of troubled South Korean top three shipyards, was summoned for questioning by prosecutors on Monday amid the ongoing investigation into the company's trillions of won (billions of U.S. dollars) of accounting frauds.

Nam Sang-tae, 66, who headed the world's second-biggest shipbuilder from 2006 to 2012, appeared in the Seoul High Prosecutors'Office on various charges, including breach of trust and lobbying for reappointment as CEO as well as his involvement in accounting frauds.

Nam, who began his second-term as CEO in 2009, was suspected of subcontracting a company, owned by his acquaintance, to gain illegal profits, while ordering one of affiliates in late 2009 to purchase a majority share in a loss-making company, which Nam then was a majority shareholder, to subcontract works to the logistics firm.

The prosecution's questioning could be focused on whether Nam was involved in any other accounting frauds during his tenure amid the ongoing probe into billions dollars of overstatement in earnings.

On June 15, the country's audit agency said Daewoo Shipbuilding overstated operating profit and net income by 440.7 billion won and 334.1 billion won each in 2013. The overstatement in 2014 reached 1.09 trillion won in operating profit and 828.9 billion won in net income respectively, according to the Board of Audit and Inspection.

The BAI said the 1.5 trillion won worth of overstatement in operating profit for the two years was made by underestimating costs of 40 offshore energy projects to build oil and gas drilling facilities. Between 2010 and 2014, offshore plant construction accounted for more than half of the shipyard's total orders.

The Korea Development Bank (KDB), state-run policy lender, failed to audit the shipbuilder properly despite its liability to supervise, the BAI said.

Belatedly, the shipbuilder restated operating losses of 770 billion won in 2013, 740 billion won in 2014 and 2.9 trillion won in 2015 respectively. Daewoo Shipbuilding was severely criticized as the company offered bonuses worth 6.5 billion won for executives and 198.4 billion for employees during the cited period.

Last September, collective bargaining between the management and labor union tentatively concluded on a bonus of 9.46 million won per worker, totaling 87.7 billion won in 2015, according to local media report.

On June 21, former chief financial offer (CFO) of Daewoo Shipbuilding, identified only by his surname Kim who worked there between 2012 and 2015, was called in by prosecutors for questioning.

From 2012 to 2014, the shipbuilder's earnings overstatement were estimated to have reached 5.4 trillion won in net income and about 2 trillion won in operating profit, Yonhap news agency reported on Sunday citing prosecutors.

Koh Jae-ho, who served as CEO in the shipbuilder from 2012 to 2015, was widely expected to be summoned in the near future for his suspected involvement in billions dollars of accounting frauds.

The prosecution is reportedly tracking down overstated accounts during the 10-year period from 2006, boosting expectations that the fraud size would surpass the currently estimated amount. Enditem