The former head of ailing South Korean vessel builder Daewoo Shipbuilding & Marine was sentenced to 10 years in prison for accounting fraud today, among the longest penalties imposed on a businessman for financial crime in the country. Ko Jae-Ho’s punishment epitomises the decline of Daewoo, which was once one of the country’s biggest conglomerates, or chaebol.
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The group fell into financial difficulties and was broken up in the late 1990s, leaving the shipbuilder – one of the world’s largest – as the biggest carrier of the name.
But the shipbuilding sector, which also includes a Hyundai unit, has suffered turmoil of its own more recently in the face of a global glut of vessels and ferocious price competition from China.
The Seoul Central District Court found Ko guilty of manipulating the company’s books in 2013 and 2014, when he was the CEO, and using them to raise bank loans.
“The accused was aware that there were extensive accounting frauds but failed to correct them”, the court said in a statement.
“Overall, his intent about the fraud is sufficiently recognised, and (he) is responsible for his failure to redress it”, it said.
Investors sustained serious financial losses as the company’s credit ratings and stocks plunged after the window-dressing came to light, the statement said.
“The calibre of this crime is great,” it said.
The court also sentenced a former vice president of the company to seven years in jail for his involvement in the fraud case.
Two state-run banks – Korea Development Bank and the Export-Import Bank of Korea – have announced an injection of some USD 2.4 billion of fresh funds into the shipbuilder to keep it afloat.
Once hailed as a major driver of the country’s export-reliant economy – Asia’s fourth-largest – South Korean shipyards have shed thousands of jobs and assets to stay afloat over the past two years.