STX Group chief indicted over alleged embezzlement
Published : 2014-05-08 21:17
Updated : 2014-05-08 21:17
Prosecutors have indicted former STX Group chairman Kang Duk-soo over alleged business malpractice and embezzlement, officials said Thursday.
Kang was accused of illegally funneling funds from STX Heavy Industries Co., a financially troubled shipbuilder, to support other affiliates in trouble. He was also suspected to have misappropriated company money to bribe political circles.
The Seoul Central Prosecutors’ Office said in its interim report that Kang allegedly made undue profits with fabricated financial statements and issued corporate bonds of more than 1.7 trillion won ($16.6 billion).
Kang is additionally charged with embezzling company funds to invest in his personal company by setting up a paper company.
Charges against Kang include embezzlement, fraud, negligence and the violation of the securities and exchange act, they said.
Five high-ranking STX officials were also indicted and taken into custody, including the STX Offshore & Shipbuilding vice chairman surnamed Hong and the group’s CFO surnamed Byun.
But the prosecution cleared him of charges that he misappropriated company money to bribe politicians.
“The investigation showed that there was no document listing politicians who received bribes from STX officials,” an official from the prosecution said. “We’re still seeking to find where the loan and slush funds have been used.”
According to the prosecution, Kang committed large-scale accounting fraud from 2008-2012 by inflating salary figures paid to its executives. Using the concocted financial statements, former STX executives illegally received corporate loans and issued corporate bonds, they said.
Prosecutors suspect that the group had borrowed a total of 900 billion won from financial institutions and issued 1.7 trillion won in corporate bonds.
The shipping conglomerate, which has 10 affiliates under its wing, has been experiencing financial turmoil due to liquidity shortages and debt, apparently caused by the shipbuilding and shipping sectors’ downturn.
Kang is a larger-than-life businessman who began his career as a salaried worker at a cement company and helped the group grow into one of the country’s biggest conglomerates. Kang headed the group from 2003 and stepped down after mounting pressure from creditors in September 2013.