SK indicts 34 over Daewoo

SK indicts 34 over Daewoo
REUTERS

SEOUL, FEB 20: Prosecutors investigating South Korea’s biggest ever corporate collapse have indicted 34 former Daewoo Group executives and auditors, but not the group’s founder, who disappeared abroad in 1999. Daewoo reigned as South Korea’s second largest conglomerate when it collapsed in July 1999, a month after reporting healthy finances.

Creditors stepped in to rescue Daewoo Motor and 11 other Daewoo companies and promptly found assets 32 trillion won ($25.70 billion) lower and liabilities 11 trillion higher than Daewoo had reported. Prosecutors said on Tuesday that the indicted executives and auditors manipulated financial statements to obtain 10 trillion won in bank loans between 1997 and 1999. Charges against the accused range from fraud to violation of external auditing regulations and the possible prison sentences if convicted from three years to life, Kang Kap-jin, a spokesman for the Supreme Prosecutors Office, told Reuters.

Daewoo’s accounts were inflated through asset swaps within the group and through double counting of sales, while a London-based company set up by the Daewoo Group was used to subsidise unprofitable business overseas, prosecutors said. “We are unable to pinpoint the where abouts of former chairman Kim Woo-choong, making it impossible to request extradition from host governments,” Kang said. Kim disappeared in 1999 shortly after his empire imploded and his where abouts have been the subject of speculation ever since, sparking reports of sightings in France, Germany, the United States and Sudan.

“If the Daewoo executives and auditors were rotten fish, then they were swimming in a rotten pond,” said Kang Seoghoon, an economics professor at Sungshin Women’s University in Seoul. “I just hope this investigation triggers broader changes in terms of corporate transparency.” Kim Woo-choong created Daewoo, which means “Great Universe”, from a modest apparel exporting firm he opened in 1967. It collapsed in July 1999 and creditors stepped in a month later to rescue Daewoo Motor and 11 other core units they are now trying to sell. Creditors have found the firms had 88.9 trillion won in liabilities, dwarfing assets of 59.7 trillion won.

Workers clash with police

SEOUL:Daewoo Motor workers hurled fire bombs and set ablaze two police buses trying to block a march by 1,000 demonstrators on the South Korean automaker’s main plant. Protesters brandishing steel pipes clashed with police armed with clubs and water cannons for the fifth day, witnesses said. About 10 people were injured but no arrests were reported. The bankrupt automaker, South Korea’s third largest, fired 1,750 workers last week after 19 months of support from creditor banks failed to staunch hefty monthly operating losses or attract a buyer for the firm and affiliates. Commerce minister Shin Kook-hwan said Daewoo’s banks would look for another buyer or might support the company themselves if takeover talks with General Motors and partner Fiat fell through.