Report: Prosecutors Question DSME’s CEO over Accounting Fraud

The head of the financially-troubled South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) was interrogated by prosecutors on January 17, 2017, due to allegations that the firm altered accounts and figures to hide its losses, local media reported.

Jung Sung-leep, DSME’s President and CEO since May 2015, has been reportedly charged with underreporting some KRW 120 billion (USD 101 million) in business losses in 2015.

Ko Jae-ho, who held the same position from 2012 to 2015, is waiting for a court’s ruling on January 18, 2017, over allegations he overreported some KRW 5.7 trillion in net assets between 2012 and 2014.

Nam Sang-tae, Ko’s predecessor, is also charged with bribery.

Furthermore, the prosecution accused Song Hee-young, a former chief editorial writer of the country’s daily newspapers Chosun Ilbo, of receiving bribes in return for writing favorable stories for DSME.

Due to the global oversupply and the lack of demand in the shipbuilding industry, South Korea’s Big Three shipbuilders including DSME, Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI) cut their joint workforce during the first half of 2016 by some 5,000 workers amid the global oversupply and the lack of demand in the shipbuilding industry. In March 2016, DSME revealed its plans to slash its workforce by 12,000 to 30,000 by 2019 as part of its cost-cutting measures.

In November 2016, DSME said it intends to raise an additional KRW 700 billion through asset sales in 2016, as the shipbuilder expected to add up to five times less orders to its order book than initially projected.

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