Prosecutors raided debt-ridden Daewoo Shipbuilding & Marine Engineering’s head offices on Wednesday in a search for evidence related to accounting fraud to conceal massive losses partly caused by poor management.

Some 150 investigators had marched into the country’s leading shipbuilders’ headquarters in central Seoul and its Okpo Shipyard on Geoje Island off the southern coast, according to the Supreme Prosecutors’ Office. 


The raids come as DSME’s audit committee had voluntarily submitted petitions requesting a probe into the company’s former executives and the former managing board’s responsibility in poor management in January.

The shipbuilder has been under pressure from its creditors, led by state-run Korea Development Bank, to come up with a stronger rehabilitation scheme to tide over a protracted slump in the global shipbuilding segment and mounting losses.

Some legal observers said the early morning raids may signal a series of future investigations into shipbuilding and shipping firms which undergo the nationwide restructuring process.

Prosecutors have already put travel bans on Nam Sang-tae, who headed the company from 2006 to 2012, and Ko Jae-ho, who succeeded Nam until last year, to question them over the losses.

Earlier this year, the shipyard said it swung to huge losses in 2013 and 2014 from earlier reported profits, citing accounting mishaps.

Since September, some 420 shareholders have raised compensation suits against the company and its former CEO Ko with the Seoul Central District Court. The total amount of compensation sought hovers around 24 billion won ($20.7 million), according to legal sources.

“The company’s 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,” they said in the filing.

The plaintiffs said they bought the stocks after believing the shipyard’s fake business reports that stated it made profits worth more than 400 billion won every year, according to the sources.

By Park Han-na (hnpark@heraldcorp.com)