Prosecutors raid Daewoo Shipbuilding over fraud allegations

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A photo taken on December 3, 2014 shows workers taking a break outside an under-construction Maersk triple-E class container ship at the Daewoo DSME shipyard in Okpo, 60km south of Busan. At some 400 metres long and capable of carrying over 18,000 containers, triple-E class ships are the largest currently in operation. Danish shipping company Maersk has ordered 20 of the vessels across two contracts totalling some 3.8 billion US dollars, with deliveries to be completed in 2015. Expected to be deployed on Maersk's Asia - Europe routes, the ships use a combination of engine technology and a slower cruising speed to reduce fuel consumption and emissions, and are touted as being considerably more efficient than rival classes. AFP PHOTO / Ed Jones / AFP PHOTO / ED JONES
A photo taken on December 3, 2014 shows workers taking a break outside an under-construction Maersk triple-E class container ship at the Daewoo DSME shipyard in Okpo, 60km south of Busan. At some 400 metres long and capable of carrying over 18,000 containers, triple-E class ships are the largest currently in operation. Danish shipping company Maersk has ordered 20 of the vessels across two contracts totalling some 3.8 billion US dollars, with deliveries to be completed in 2015. Expected to be deployed on Maersk’s Asia – Europe routes, the ships use a combination of engine technology and a slower cruising speed to reduce fuel consumption and emissions, and are touted as being considerably more efficient than rival classes. AFP PHOTO /

SEOUL, South Korea (AFP) — Prosecutors on Wednesday raided Daewoo Shipbuilding and Marine Engineering Co. (DSME), one of South Korea’s three giant shipbuilders, as they probe a suspected accounting fraud, the company said.

Some 150 staff from the Supreme Prosecutors’ Office stormed the DSME headquarters in Seoul and its Okpo shipyard on the southern island of Geoje.

“This morning, they started collecting accounting books, computer hard disks and other documents,” a spokesman of the company told AFP.

DSME faces allegations that it manipulated its financial statements in 2013 and 2014 in order to make it appear financially healthier than it really was.

Prosecutors imposed travel bans on former CEO Nam Sang-Tae who led the company from 2006 to 2012 and Ko Jae-Ho, who succeeded him until last year.

In January, auditors filed a petition with prosecution authorities, calling for a probe into suspected accounting irregularities.

More than 400 shareholders have also filed a lawsuit against the company and Ko, claiming a total of $21 million in compensation for losses suffered when the firm’s shares fell as a result of the alleged fraud.

DSME is accused of saying its losses in 2013 and 2014 were $2 billion lower than they really were.

The company said it suffered a 5.1 trillion won ($4.4 billion) net loss in 2015, six times greater than the previous year’s 863 billion won loss.

Auditors said $2 billion of losses left over from 2013 and 2014 had been belatedly factored into the 2015 statement.

DSME and two other South Korean shipbuilding giants –Hyundai Heavy Industries and Samsung Heavy Industries — have enjoyed a decade of almost uncontested global dominance.

But a prolonged slump in oil prices and the global economic slowdown has sapped demand for tankers and container ships, while overcapacity, regional rivalry and competition from cheaper Chinese shipbuilders has squeezed profit margins.

The three firms racked up a collective loss of 8.5 trillion won last year and have submitted self-restructuring plans to creditors aimed to keep themselves afloat.

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