Former DSME chief arrested for accounting fraud

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Former DSME chief arrested for accounting fraud

A former chief executive of Daewoo Shipbuilding & Marine Engineering (DSME) was arrested without a warrant early Tuesday after a day of questioning by Seoul prosecutors for his alleged involvement in the company’s accounting fraud.

Nam Sang-tae, 66, who served as CEO of DSME from 2006 to 2012, was summoned to the Seoul High Prosecutors’ Office Monday amid a larger ongoing probe into the troubled shipbuilding company.

The Supreme Prosecutors’ Office’s special investigation team questioned Nam on accusations of large-scale accounting fraud, granting business favors to friends, creating secret slush funds and engaging in illegal lobbying activities with government officials and politicians.

Prosecutors said Tuesday that through their investigation, they secured evidence of Nam having conducted additional criminal charges, including trying to destroy evidence, leading to his emergency arrest.

A prosecutor official said, “We decided to arrest him without a warrant taking into consideration circumstances including the confirmation of additional criminal charges.”

A warrantless arrest may be carried out if a suspect is charged with a grave crime, there is no time to formally issue an arrest warrant and there is a possibility of destruction of evidence or escape. Prosecutors said later that day that they planned to request an arrest warrant for Nam, as well.

A travel ban was issued on Nam earlier this month.

Nam has been accused of granting business favors to close acquaintances, including to a 65-year-old college friend surnamed Chung who headed a logistics company, leading to a loss of 12 billion won ($10.23 million) for DSME. In return, Nam received dividends and shares in Busan International Distribution Center (BIDC) under a borrowed name.

Chung was arrested earlier this month for charges of embezzlement, forging of evidence and negligence.

Nam also allegedly provided preferential treatment in exchange for bribes to architect Lee Chang-ha, another acquaintance, including a hotel project in Oman and a building project in Dangsan-dong in Yeongdeungpo District, Seoul. Lee made billions of won in profit through these deals.

This comes just 20 days after prosecutors first launched the investigation into the shipbuilding company.

On June 8, prosecutors raided the offices of DSME, including its headquarters in downtown Seoul and shipyards in Geoje, South Gyeongsang, as part of their investigation, which is unfolding much quicker than the probe into Posco last year. The Posco probe took half a year for prosecutors to finally summon former Posco CEO Chung Joon-yang over corruption allegations in September.

Prosecutors are expected to summon another former DSME chief executive, the 61-year-old Ko Jae-ho. During Ko’s time helming the company from 2012 to 2015, the company allegedly cooked the books, profiting 5.4 trillion won.

Prosecutors will then expand their investigation to officials of the Korea Development Bank, the main creditor and the largest stakeholder in DSME, which failed to properly oversee and manage the shipbuilder.

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