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Warranty Applied for Oh Sang-soo, CEO of Serome

Posted November. 20, 2002 22:59,   


The prosecution found out that Serome, which is traded on the KOSDAK, had its investors incur huge damages. Back in February of 2000 when the company increased its capital in the amount of \370 billion (approximately $300 million), Serome cheated its investors through publication of false reports and window-dressing.

The Criminal Division 9 of the Seoul Public Prosecutors` Office announced yesterday that it filed for the arrest warrant for Oh Sang-soo (37, photo), CEO of Serome. He, according to the prosecution, allegedly manipulated the company`s financial reports by inflating its sales volume. Then, he published the reports, and illegally gained multimillion dollars through capital increasing based thereon.

The DA`s office also filed with the court for the same warrant for Choi Eung-yul (44, Director of an accounting firm, Ahnkun). Choi allegedly knowingly ignored the false reporting and window-dressing by Oh, thereby neglecting his duty as an auditor of the company.

The court, on the other hand, will reportedly issue subpoenas to them in order to have them into custody. Then, it will ask to the court to hold an arraignment in the afternoon, today.

Oh is suspected of falsely inflating the figures on the financial statement for the fiscal year of 1999. For example, he allegedly wrote as Serome`s sales volume \26.1 billion on the financial statement, not the actual figure of \20.5 billion. In addition, he also conjured up the ledgers in such a way to produce \1 billion in the black. The company, however, was in the red in the amount of \10 billion at that time.

In addition, Oh reported to the Financial Supervisory Service and recorded on the `99 financial statement that he owned 56% of Dailpad`s shares, a company affiliated with Serome. The DA`s office, however, discovered that his actual shares came to only 48.2% of the total shares.

Then, Oh allegedly distributed those records to investors through analysts and the press. 489,000 investors participated in the capital increasing that took place in February of 2000, trusting those manipulated reports. As a result, they sustained a total of \370 billion.

Oh had sold his and his relatives` subscription rights for \22.5 billion. But, in two years, he squandered up an amount of \180 billion through numerous unsuccessful investments.

In October of 1999, Dialpad, Inc, announced that it began an online long distance call business offering, for free of charge, international calls to customers. After the announcement, the par value of one share of Serome shot up to \300,000 from the original \500, a 600 times increase. Currently, the value is just hovering over \5,000-6,000.

The DA`s office also unearthed that Oh had Searom Technology Investment, Inc (STI), an affiliate of Serome, Inc., incurring a loss. In order to conceal the false reporting of his shares of Serome, Inc., Oh allegedly used $13 million of the STI`s money buying the shares of the Dialpad USA, which was owned by an American investment company, at a higher price than traded.

In July, one permanent auditor of Serome filed a criminal claim against Oh with the prosecution, accusing Oh of embezzlement and other charges. Soon after the claim, the Financial Supervisory Service also filed a similar claim against Oh, holding Oh accountable for negligence and damage to Serome.

In the meanwhile, Oh announced his resignation through Kim Dae-sun, the technology vice president, and said, "Under the circumstances, it is hard to defend the management with a case pending against me. So I decided to resign."

In the upcoming interim meeting of shareholders scheduled for Dec. 13th, Oh is expected to officially resign, and pass over his post to Hong Ki-tae, president of Serome Venture Investment, Inc. Therefore, the war between two camps over the office of CEO will be wrapped up with Hong`s camp getting the victory.

Sang-Rok Lee Jung-Eun Lee myzodan@donga.com lightee@donga.com