Daewoo Shipbuilding's offices raided in South Korea
What's the story
South Korean authorities reportedly raided offices of the world's second largest shipbuilder–Daewoo Shipbuilding and Marine Engineering; it is a part of officials' investigation into the company's alleged accounting irregularities. Earlier, an audit committee had requested a probe into two of the shipbuilder's former CEOs suspecting a possible mismanagement of funds. Officials are investigating into whether DSME manipulated its financial statements in 2013 and 2014.
Introduction
About Daewoo Shipbuilding &Marine Engineering Company
Daewoo Shipbuilding & Marine Engineering Company Limited (DSME) is a Korean company, which was once a part of Daewoo Group; it became independent in 2000. DSME is the world's second-biggest shipbuilder and also is one of the 'Big Three' shipbuilding companies in South Korea (other two being Hyundai and Samsung). The company's headquarters are in Seoul and branches in London, Houston, and Okpo.
Personal
150 officials raid DSME offices
Reportedly, around 150 officials had reached the headquarters of DSME in Seoul and also its shipyards on the Geoje Island. The officials had seized accounting books, computer hard drives, and other related documents during the raids.
Petitons Filed
DSME audit committee filed petitions
In Jan'16, audit committee of DSME had submitted petitions voluntarily and requested an investigation into the responsibility of former CEOs and former management board in a bad management. DSME had been under pressure lately from its creditors, led by Korea Development Bank, to come up with a stronger scheme and overcome the mounting losses. The recent raids reportedly indicated a series of investigations in future.
Personal
Travel bans of two former CEOs
South Korean prosecutors have reportedly put travel bans on DSME's former CEO and President, Nam Sang-tae (2006-12), and his successor Ko Jae-ho (2012-15) to interrogate them over the huge losses reported between in 2013 and 2014.
Shareholders
Shareholders seek $20.7 mn compensation
Earlier in 2016, DSME had stated reasons like accounting mishaps for the sharp decrease in profits and also the massive losses in 2014. Since Sep'15, over 420 shareholders filed compensation suits against DSME and its former CEO Ko Jae-ho in the Seoul Central District Court. Authorities said that the total compensation amount shareholders sought from DSME added up to a total of $20.7 million.
Quote
DSME allegedly exaggerated its sales and profits
The plaintiffs said that DSME faked its business reports and profits and added: "The company executives exaggerated DSME's sales and operating profit as well as brought down the total contract price for large offshore plant projects including Norway's Songa offshore project."
Losses
Korean shipbuilders and their struggle
DSME reported a loss of $2.8 billion in 2015–the company's biggest to date. Apart from DSME, other Korean shipbuilders like Hyundai Heavy Industries and Samsung Heavy Industries have also received a blow because of the decrease in oil prices and worldwide economic slowdown. Not only do they face competition from Chinese shipbuilders but also struggle with the reducing demand for container ships and tankers.