Banks Filing Lawsuits against Daewoo`s Accounting Firms and CPAs for Negligence

Banks are suing accounting firms and CPAs that audited Daewoo affiliates, alleging their negligence proximately caused the bankruptcy of the group and seeking multimillion dollars.

"We decided to commence a civil action against Ahngun, P.C., and Sangdong P.C., along with its employee CPAs. They neglected their duty in conducting audits of Daewoo Motor, Inc. and Daewoo Heavy Equipment, Inc. Consequently, they caused huge damages to creditor banks. Thus, we filed a lawsuit with the Seoul District Court on Nov. 30th," said CH bank.

The monetary remedy the bank is seeking reaches up to 13.1 billion won(approximately 10 million won) in total. In detail, the bank alleges that Ahngun and its associate CPAs are liable for 7 billion won due to their negligence in overseeing Daewoo Motor, Inc., and Sangdong for 6.1 billion won for its negligence in auditing Daewoo Heavy Equipment, Inc.

Seeking the monetary remedy, the bank seeks half a billion won from each accountant, and 0.7 billion won from each partner of the firms. It added up all the amounts sought against each accountant in the damages against the firms they belong to.

One senior official of the bank confirmed, "In addition to those two companies` cases, we will also commence a civil action against an accounting firm that had monitored Daewoo, Inc. As a preliminary measure, we are conducting a research to figure out the assets of the firm. The new lawsuit would be filed by the end of this month."

The official explained, "Daewoo obtained loans and embezzled the payments made for its exports through window-dressing. The CPAs must have known. In other words, they aided and abetted the misconduct. That is why we sued them."

Prior to CH`s actions, Woori Bank also filed a lawsuit on Nov. 22nd against the same firms and accountants, alleging the same amount of damages.

Again on Nov. 28, Woori Bank filed a lawsuit, seeking money damages from Choongwoon, P.C. and its 5 associates that audited Daewoo Communication, Inc.

Moreover, Seoul Guarantee Insurance will reportedly file a lawsuit against 19 people including former directors of Daewoo, Inc. and CPAs who handled the company.

In September, Korea Deposit Insurance, Corp. demanded that 17 creditor banks file lawsuits against 49 current and former directors of 5 Daewoo affiliates, 4 accounting firms and its 35 associate CPAs. The KDIP alleged that the directors were responsible for 4.3 trillion won worth of bad loans of Daewoo, and the firms and accountants for 2.8 won trillion.

Chi-Young Shin higgledy@donga.com