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Let's Find Out Everything

Published: 05 Jan. 2003, 12:35

With the discovery that Daewoo Group companies forged account records in order to borrow huge amounts of money, the Public Prosecutor''s Office has arrested former Daewoo executives and an accountant. In its special supervision of Daewoo last year, the Financial Supervisory Service turned up evidence that the books had been doctored on a large scale and reported this to the prosecutors'' office, so it was expected that Daewoo would be investigated for corrupt practices. What is shocking about this most recent development is the revelation of the staggering amounts of money fraudulently recorded or embezzled and the specific methods used. So far, the fabricated entries uncovered in the books of five Daewoo affiliates total 22.9 trillion won ($18.3 billon) and Daewoo''s certified public accountants are said to have received 470 million won to turn a blind eye to the doctoring. Kim Woo-choong, the founder and former chairman of Daewoo, is under suspicion of having diverted foreign loans and other money into a secret account in Britain, accumulating for himself a cache of over 10 trillion won.

The amount of money in the forged records is astronomical, coming to about one-fifth of the budget of the Republic of Korea for this year. This is the result of the way corporations were run in the past, when such methods were accepted as the norm in an atmosphere in which quantity and growth were considered the be-all and end-all of business success. It is mystifying how companies awash in debt and under corrupt management could last so long by merely doctoring their financial statements so that they would appear to be exemplary corporations with excellent credit, deserving of ever more loans.

Just how did this doctoring of the books manage to escape detection year after year? Are we to believe that the supervisory authorities and financial institutions did not even get a whiff of something fishy? It has been said that the owner of a chaebol rules his business like an emperor, and apparently all Mr. Kim had to do was say the word and dozens of management people regard- ed it as part of their job to fake the books. This Daewoo incident should serve as an example why corporate accounting practices have to be fair and transparent. Companies that doctor their books hurt the credibility of the entire nation and should be regarded as public enemies. Too many businesses have been brought to the brink of ruin and the people''s hard-earned tax money has had to be injected in order to salvage some of them. Those responsible must be held strictly accountable for their misdeeds, and for this very reason all those involved in forging Daewoo''s books have to be brought to justice.

By staying overseas to avoid investigation, Mr. Kim, who bears the greatest responsibility in the Daewoo case, is acting in a way unworthy of a great business leader. With those managers who followed his directives lined up to face the legal music, he should come home and do likewise, making whatever he knows of the truth known and accepting whatever punishment is meted out for his violations of the law. He is the only one, after all, who can clear himself of suspicion of having stashed Daewoo money away illegally, if he is indeed not guilty of that charge. The suspected secret account is an explosive issue because it may have ramifications involv- ing political corruption. In fact, since the FSS has already uncovered the rigged books, the investigation should now focus on the secret account. The prosecutors'' next task is to shine a light into every shady nook in the maze of connections between business and politics.