[Editorial] Where is Daewoo slush fund?

In view of the current business climate, some people in the business sector have expressed sympathy with respect to the legal action taken by law-enforcement authorities against former and current executives as well as accounting officials of the Daewoo Group. The legal action was taken in connection with the doctoring of its books on the orders of former Daewoo Group chairman Kim Woo-Choong. When testifying, executives of Daewoo subsidiaries reportedly passed the buck to ex-Daewoo chairman Kim, who wielded almost absolute power in running the conglomerate or Chaebol.

The former Daewoo owner is now living in an undisclosed country.

However, the fact is that this illicit act, involving some 23 trillion won, must have been made possible through systematic and deliberate collusion between the group chairman and executives who doctored the account books and concealed the irregularities.

This particular case needs to be thoroughly probed in order to provide a lesson as to the price that must be paid for failing to provide accurate financial statements and make fair audits and inspections.

Through the thorough eradication of this practice and the establishment of a transparent and just accounting system that lives up to international standards, Korean enterprises will be able to win confidence from foreign investors. Unfair and opaque accounting practices are sure to become a stumbling block in efforts to attract further foreign investment and result in the underestimation of the stock prices.

By pulling through this painful process, a favorable business climate will be fostered in which not only the owners and top executives of enterprises but also specialist managers take due responsibility for their activities.

Accounting corporations, meanwhile, are also in moral hazard by jumping at the bait offered by their favorite business firms. With punishment against the accounting corporations as well as their accountants, who sanctioned the fabricated account books, momentum could be provided for establishing a stricter audit system.

The particular Daewoo financial scandal involved the window-dressing of account books carrying a huge amount of money and acquisition of more than 10 trillion won in loans from banks and other financial institutions and then the rampant issuance of insolvent corporate bonds, consequently incurring great losses to the banks and ordinary investors. Specifically, the Daewoo subsidiaries received and wasted tens of trillions of won, inflicting great damage on ordinary taxpayers.

Former Daewoo chairman Kim should return home ending his overseas flight and behave himself as a responsible man. The Financial Supervision Service and the prosecution have found out his secret accounts containing slush fund formed with overseas loans and other means from the British Financial Center (BFC) and applied for a summons to the head of the BFC`s Korean office.

It seems that part of slush fund deposited with the BFC has been funneled into the nation and spent for lobbying. On the streets, various rumors are circulating in connection with the suspicion. The prosecution needs to demonstrate a firm resolve to force Kim`s repatriation through cooperation with Interpol and investigate him to get to the bottom of the festering financial scam.