[비즈한국] The fallout from the massive accounting fraud at Hanwha Ocean042660 (formerly Daewoo Shipbuilding & Marine Engineering, DSME) is beginning to impact the financial sector. On August 14, the Supreme Court upheld a lower court ruling ordering Hanwha Ocean to pay approximately 44.2 billion KRW in damages to the National Pension Service (NPS). Of this amount, 14.7 billion KRW is to be paid jointly by Hanwha Ocean and Deloitte Anjin LLC. On the same day, Hana Bank and DB Financial Investment (formerly Dongbu Securities) also received finalized compensation rulings. Following the Supreme Court ruling for the NPS, which was the first of the bondholder lawsuits related to the accounting fraud, attention is turning to the total scale of compensation Hanwha Ocean will have to pay.
On August 14, the Third Civil Division of the Supreme Court upheld the lower court’s partial victory for Hana Bank and DB Financial Investment in their damages suits against Hanwha Ocean and Deloitte Anjin. Both Hana Bank and DB Financial Investment suffered losses because they purchased commercial paper (CP) issued by DSME in 2015 at prices higher than fair market value due to the accounting fraud. Hana Bank filed its lawsuit against Hanwha Ocean and Deloitte Anjin in August 2017, and DB Financial Investment followed in June 2018.
The DSME accounting fraud refers to the incident where the company falsified its financial statements for the 2012–2014 fiscal years to hide losses totaling roughly 2 trillion KRW. The scandal was brought to light through media reports in July 2015. In 2017, the executives involved in the conspiracy were criminally punished, and the company faced administrative penalties including fines and business suspensions from financial authorities. As the stock price plummeted, shareholders, institutions, and investors suffered massive losses. Deloitte Anjin, which served as the auditor during the period of the fraud, could not avoid responsibility. DSME was acquired by Hanwha Group in May 2023 and changed its name to Hanwha Ocean.
In April 2015, Hana Bank purchased 9 billion KRW worth of commercial paper issued by DSME. Because DSME issued the paper based on credit ratings derived from false financial statements, Hana Bank purchased the paper at a price higher than its actual value.
In its damages lawsuit, Hana Bank argued, "Had we known about the accounting irregularities, we would not have purchased the commercial paper. We acquired it believing the accuracy of the business reports, only to find we could not be repaid after the fraud was exposed." They claimed, "Without the accounting fraud, we would have acquired the DSME commercial paper for approximately 6.9 billion KRW, but we purchased it for 9 billion KRW, resulting in a loss of about 2.1 billion KRW."
The first-instance court recognized the scale of damage claimed by Hana Bank, stating, "The contents of the audit reports, which failed to uncover the accounting fraud, influenced the determination of the commercial paper's value, thereby leading to an unfair price formation, and the purchaser suffered losses as a result."
Regarding the compensation of approximately 2.1 billion KRW, the court ordered Daewoo Shipbuilding (Hanwha Ocean) to pay 70% and Deloitte Anjin to pay 30%. The second-instance court rejected appeals from both sides, and with the Supreme Court upholding the lower court's ruling, Hana Bank is set to receive 1.46 billion KRW from Hanwha Ocean and 625.8 million KRW from Deloitte Anjin. However, according to the second-instance judgment, the litigation was succeeded by Shinhan Bank as the trustee of the commercial paper fund changed from Hana Bank to Shinhan Bank in December 2023. When asked whether the compensation had been received, Shinhan Bank did not provide a response.
DB Financial Investment also had it recognized through the trial that it could have acquired the commercial paper at a lower price had it not been for the intentional accounting fraud or negligent auditing. DB Financial Investment acquired DSME's commercial paper on two occasions in March and April 2015, with the purchase price reaching 18 billion KRW.
Notably, for DB Financial Investment, the compensation amount increased significantly in the second-instance trial. While they initially claimed 300 million KRW in the first trial, the loss caused by the high-price purchase of DSME's paper was calculated at 1.99 billion KRW. DB Financial Investment appealed for an increased amount, and the second-instance court partially accepted it, ordering Hanwha Ocean to pay 60% (1.19 billion KRW) and Deloitte Anjin to pay 20% (398.7 million KRW). Hanwha Ocean and Deloitte Anjin appealed, but the Supreme Court dismissed it, finalizing the compensation at approximately 1.6 billion KRW.
Meanwhile, as the final rulings emerge, starting with the representative case of the National Pension Service, the total scale of compensation for the accounting fraud scandal is drawing attention. Other bondholders affected by the fraud include Kyobo Securities030610, Yuanta Securities003470, Hi Investment & Securities, Hyundai Motor Securities001500, and Kookmin Bank. Through its semi-annual report, Hanwha Ocean specified that there are 23 bondholder damages lawsuits and 38 shareholder damages lawsuits related to the accounting fraud. The total value of the bondholder lawsuits is 165.1 billion KRW, and the shareholder lawsuits amount to 27.5 billion KRW.
Among the bondholder lawsuits, 21 have reached a first-instance ruling. Among these, results from the second-instance court have been issued in 6 cases, and one case was concluded through a recommendation of reconciliation during the second-instance proceedings. The appellate amount cited in the second-instance rulings is 65.1 billion KRW. Hanwha Ocean has accounted for 261.7 billion KRW in provisions, which is the estimated loss including the accounting fraud-related damages and other remaining lawsuits.