Daum hit by rigging allegations

Daum Communications, the largest Internet portal site in Korea, is facing allegations that it inflated its revenue in 2001 through questionable transactions with a subsidiary. Quoting a former employee at Daum Solutions, the Money Today newspaper reported on its Web site Monday that the firm had received exorbitant payments from its software development unit as advertisement fees. While it is unclear whether Daum delivered on the advertisement contract, the newspaper said, the money helped Daum notch an operating profit of 260 million won ($220,000) in 2001 despite industry-wide woes as the dot-com bubble burst. Daum recorded an operating loss of 5.5 billion won in 2000. In response, Daum posted what it said were its contracts with Daum Solutions, the software developer, on its Web site. Lee Jae-woong, the chief executive of Daum, met the press Monday afternoon to deny the allegations of book rigging and to announce that the company would seek legal redress. The Fair Trade Commission said Monday that the issue would not meet the test to consider it an accounting irregularity; many securities analysts agreed. Despite Mr. Lee’s protests, Daum shares traded yesterday down as much as 7 percent. They ended the day at 57,000 won, down 4.3 percent. Analysts said the charges, whether true or not, would do some short-term damage to the firm. Daum has 30 million subscribers to its e-mail and community services. Daum Solutions is now being liquidated. by Kim Hyo-jin