PracticeConsultingDaewoo chiefs charged with fraud

Daewoo chiefs charged with fraud

Thirty-four Daewoo executives and accountants have been accused of inflating the car-manufacturers assets by Won41Tn (£23bn). If guilty, the accused will have committed the biggest accounting fraud ever.

South Korean prosecutors alleged indicted executives and auditors manipulated financial statements to obtain Won 10Tn won in bank loans between 1997 and 1999, according to Reuters.

Prosecutors are also investigating a London-based company, British Financial Unit, that may have been used to subsidise business overseas.

Charges against the accused range from fraud to violation of external auditing regulations and the possible prison sentences, if convicted, range from three years to life, a spokesman for the Supreme Prosecutors Office in Seoul, told Reuters.

Daewoo collapsed in July 1999, just a month after reporting a healthy financial situation. At the time it was the second-biggest conglomerate in South Korea.

A due diligence conducted by creditors General Motors and Fiat, who eventually took control of the group, found Daewoo’s liabilities of Won 88.9Tn exceeded its assets by Won 29Tn.

The scandal has triggered calls for better accounting standards to be used in Korea, according to the Financial Times. Foreign investors are thought to be among those particularly concerned.

Representatives from Daewoo were unwilling to comment.

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