Daewoo Shipbuilding & Marine Engineering gave hefty cash bonuses to its employees after overstating the company’s operating profits in a multitrillion won accounting fraud, local reports said Friday.

The reports, citing sources at the state prosecution investigating the debt-ridden shipbuilder, said that DSME, under the direction of then-CEO Koh Jae-ho, gave out a total of 490 billion won ($420 million) in performance-based bonuses from 2012 to 2015. The CEO himself pocketed around 700 million won in such bonuses. 


“We are looking into whether the former chief gave excessively generous bonuses with the intention of preventing whistle-blowing on the corruption of the management,” a source was quoted as saying.

On Wednesday, Koh was arrested on charges of illegally borrowing around 40 trillion won after manipulating accounts to make it look as if the company was in the black.

Based on the cooked books, the shipbuilder reported a surplus of more than 900 billion won between 2013 and 2014. However, auditors later found that the company had in reality posted a loss of more than 1.5 trillion won during the period.

Amid a series of revelations about corruption among the top management of DSME, politicians are pushing to implement new laws to claw back bonuses inappropriately paid.

Rep. Chung Yoo-sub of the ruling Saenuri Party said on Monday at the National Assembly, “We will push for a special law to claw back employee compensations given out by corrupt management if the company has received public funds.”

DSME has received nearly 7 trillion won of public funds. It has become a subsidiary of the state-run Korea Development Bank in 2000 as a result of a bailout.

DSME is also devising various ways to redeem the money from the former chiefs and executives.

“We will find a way -- whether through persuasion or filing of lawsuits -- to claw back the bonuses paid in 2013 and 2014 once the Financial Supervisory Service’s inspection is completed,” DSME’s spokesperson said.

By Shin Ji-hye (shinjh@heraldcorp.com)