The state-run Korea Development Bank on Tuesday denied speculations that it was involved in the suspected fraudulent accounting of Daewoo Engineering & Construction, in which it holds a majority stake.
Late last year, the Financial Supervisory Service said that it detected evidence that the builder concealed deficits amounting to 1 trillion won ($933 million) by tampering with its accounting records.
“We presume that the disputed documents (of Daewoo E&C) were not official accounting records, but the company’s hypothetical scenario as to what kind of deficits may happen in the worst case,” said Hong Ky-ttack in a press briefing.
|Hong Ky-ttack, chairman of KDB Financial Group, speaks in a press briefing Tuesday. (Korea Development Bank)|
The accounting firm in charge had also come to a similar conclusion and deemed the papers as legitimate, he said.
“The FSS nevertheless encouraged Daewoo E&C and other construction companies to be more conservative when preparing their financial statements in the future, so as to prevent possible abuses,” he also added.
Kim Hyeong-jong, the bank’s private equity fund director, also said that the documents were only a means of preventive risk management for the builder, which was expecting another hard year of business, and was thus not intended for outward flow.
The KDB executive thus dispelled the growing suspicions that it, too, may have been involved in Daewoo E&C’s illicit accounting.
Since 2010, KDB holds 51 percent of the builder’s shares through an affiliated equity fund.
For this reason, the FSS suggested that incumbent or former executive members of the KDB, as well as those of Daewoo E&C, may have been actively involved in the financial manipulating.
“Upon the FSS investigation, Daewoo E&C stocks instantly fell by 10 percent or more, causing massive financial damages to stockholders,” said Kim Youl-jung, the bank’s finance division executive director. “Financial authorities should be more cautious before announcing such irregularity suspicions, unless they have more tangible proof.”
The KDB chief is also preparing for the new integrated system with the Korea Finance Corporation, which is expected to kick off within the year.
“We are currently running a temporary task force to prepare for the upcoming merger, but it will be substituted by a comprehensive committee once the related bill is passed by the National Assembly,” Hong said.
By Bae Hyun-jung (email@example.com)