Former Daewoo Officials Try to Correct Fraud Allegation “Misunderstandings”

A group of former Daewoo Group officials started making their voices systematically heard over the extent of Daewoo’s accounting fraud and its hiding of money abroad.

On July 4, they ran an opinion advertisement in some newspapers titled, “There should not be any distortion of the truth over the Daewoo crisis.” In the advertisement, they apologized for having put a huge burden on the national economy, but they also argued that there were some misunderstandings over the Daewoo crisis.

The alleged misunderstandings indicated by them are: a) the currently known size of the accounting fraud, 41 trillion won, is a miscalculation derived from simply adding up the figures in 1997 and 1998, while the actual amount of its accounting fraud stands at 15 to 16 trillion won; b) the size of its accounting fraud jumped due to sharp rises in the won-dollar exchange rate and interest rates after the Asian financial crisis; and c) the British Finance Center (BFC), widely known as an organization for managing Daewoo’s slush fund, is nothing but an account of Daewoo’s British corporation for making overseas investments and supporting the local corporation.

Baek Ki-seung, the former director of public relations at Daewoo Group who now is serving as the public relations agent for former Daewoo Chairman Kim Woo-jung, explained, “After former Chairman Kim was sent to jail, former Daewoo managers agreed to raise funds to make the advertisement in an effort to get the ‘misunderstandings’ corrected.”

The central investigation department at the Supreme Public Prosecutor’s Office (SPPO), however, maintains the position that the fact that cooking the books is illegal never changes, though it partly admitted their claims.

“Accounting fraud or window dressing is against the law, regardless of its extent, and there still remain a lot to be investigated, including the recent discovery of some 60 suspicious BFC-related bank accounts,” said an official of SPPO’s central investigation department.

Joong-Hyun Park sanjuck@donga.com jin0619@donga.com