Kakao Mobility guilty of accounting fraud: FSS

A Kakao taxi parked at a taxi station in Seoul on Nov. 2. [NEWS1]

Korea’s financial watchdog said Kakao Mobility intentionally committed accounting fraud and advised the company remove the corporate CEO.

The conclusion came after the Financial Supervisory Service (FSS) in October started looking into Kakao Mobility’s financial statements to determine whether the firm overstated its revenue. The FSS investigated whether the subsidiary of Korea’s tech giant Kakao appropriately conducted accounting on transactions with affiliated cab operators.

The FSS concluded that the motive behind its overstated revenue calculation was “intentional,” the most severe level of infringements.

The state agency will push for levying an unidentified financial penalty and file a complaint with the prosecution. It also advised the company to remove CEO Alex Ryu.

The FSS delivered the notice of the conclusion to Kakao Mobility Thursday afternoon, the company confirmed, with an advance notice coming before the submission of the conclusion to the Financial Services Commission (FSC).

Kakao Mobility pays between 16 to 17 percent of fare revenue to affiliated cab operators for the services they provide, including the sharing of driving data.

KM Solutions, a subsidiary of Kakao Mobility under which affiliated taxi drivers are registered, receives 20 percent of the fare revenue from the cab operators in return for access to its dispatching platform, device maintenance and regular quality management of franchise services.

The Kakao Mobility and SM Solutions contracts signed by affiliated cab operators should be seen as a single contract, and only the difference in the commission rate should be calculated as Kakao Mobility’s revenue, according to the FSS. But Kakao Mobility argued that its deals with the affiliated cab operators and those signed by KM Solutions are separate.

“We faithfully explained the company’s accounting calculation method, but it seems our stance hasn’t been sufficiently elucidated,” said Kakao Mobility. “We will faithfully explain our stance” to the FSC, it added.

BY JIN MIN-JI [jin.minji@joongang.co.kr]