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Hanwha Group’s subsidiaries hit with $2.74 million fine for accounting fraud

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Staff Writer |
Kim Seung-youn
South Korea   The Financial Supervisory Commission

Financial authorities in South Korea fined Hanwha Group’s three subsidiaries, which were caught committing accounting fraud, 3.32 billion won ($2.74 million).

The Financial Supervisory Commission (FSC) announced that it held a regular meeting on December 28 and decided to fine Hanwha Engineering & Construction (E&C), Hanwha Galleria and Hanwha Advanced Materials 2 billion won ($1.65 million), 720 million won ($593,814) and 600 million won ($494,845), respectively.

They were fined for not recording the fact that it got a loan from special parties concerned and stand surety in the explanatory notes to their financial statements. The three companies will also face sanctions on auditor designation for two to three years.

The FSC carried out the investigation and found out that Hanwha E&C lent 43 billion won ($35.46 million) from two subsidiaries or stood surety between 2005 and 2006 but didn’t reflect it in its financial statement. The company was also caught highballing its assets after purchasing land at a high price.

The investigation also found that Hanwha Galleria and Hanwha Advanced Materials didn’t write about loans worth 379.7 billion won ($313.15 million) and 142.5 billion won ($117.53 million) from special parties concerned, payment guarantees and sale transaction in the notes to their financial statements.

The imposition of penalty surcharge on three Hanwha affiliates is the administrative measure that came after Seoul Seobu District Public Prosecutors Office started the investigation for accounting fraud of Hanwha Group in the past.

Seoul Seobu District Public Prosecutors Office indicted 11 executives, including Hanwha Group Chairman Kim Seung-youn, without detention on charges of malpractice and embezzlement in 2011.

Chairman Kim was accused of unjustly disbursing 320 billion won ($263.92 million) of affiliate assets in order to pay debts of disguised affiliates from 2004 to 2006 and selling his stocks to his family members at giveaway prices from 2004 to 2006, causing a loss of more than 100 billion won ($82.47 million) on Hanwha Group.

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