PR agency raided as Daewoo probe continues

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PR agency raided as Daewoo probe continues

As part of the ongoing probe surrounding Daewoo Shipbuilding & Marine Engineering (DSME) into corporate malpractice and accounting fraud charges, a PR agency that carried out press work for the shipping company was raided Monday on suspicions it received some 2 billion won ($1.8 million) in kickbacks.

Prosecutors who were dispatched to the agency’s office as well as the CEO’s house in order to collect computer hard drives, accounting books and other paper documents said they found key evidence proving the allegations.

The PR agency is said to have received at least 2 billion won from 2008 to 2011, when Nam Sang-tae worked as CEO of the Daewoo company. The paycheck, authorities said, was far more than what the agency had given back in services.

According to prosecutors, the head of the agency had very close connections with former President Lee Myung-bak’s political aides and Min Yoo-sung, former chairman of the Korea Development Bank.

The prosecution has been trying to figure out for months whether the Korea Development Bank, the main creditor and largest stakeholder of DSME, failed to properly oversee and manage the shipbuilder on purpose in return for parachute appointments.

In March, the Financial Supervisory Service announced that DSME revised its financial statements, changing its 440.9 billion won operating profit, reported in 2013, to an operating loss of 778.4 billion won, and revising a 471.1 billion won operating profit in 2014 to a 742.9 billion won loss.

Prosecutors suspect that DSME took out some 45 trillion won in loans from the Korea Development Bank, which holds 49.7 percent of DSME shares, as well as other loans from other entities, by way of accounting fraud.

Whether the bank was aware of the accounting fraud is currently being investigated.

On Sunday, Kang Man-soo, former chairman of Korea Development Bank who helmed it during Lee Myung-bak’s presidency, issued a statement denying all charges, claiming he never pressured the Daewoo shipping company to hire his close aides.

Kang, 71, who also served as former minister of strategy and finance during former President Lee’s term, is known to have had close ties with him, leading prosecutors to wonder whether Lee was involved in the shady act.

Kang will likely be summoned on allegations of bribery and breach of trust as early as Friday, prosecutors said.

According to a report DSME handed over to Min Byung-doo, a lawmaker of the main opposition Minjoo Party, 18 of the 34 advisors at the ship builder, who earn an average of 150 million won annually, were hired during the former Lee administration, from February 2008 to February 2013.

Among the 18, seven to eight were hired around the time Kang was appointed as the new chairman of the Korea Development Bank.

Authorities said they have collected key evidence suggesting Kang had pulled some strings in their employment.

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