Switzerland's ABB hit by $100 million South Korean fraud

Wed Feb 22, 2017 11:51pm EST
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By John Revill

ZURICH (Reuters) - Swiss engineering group ABB (ABBN.S: Quote) on Wednesday said it fell victim to a "sophisticated criminal scheme" at its South Korean subsidiary, with the chief suspect an executive responsible for ethics training.

The executive, named by a source in South Korea as Oh Myeong-se, was treasurer and one of two integrity ombudsmen for ABB Korea - to whom staff were supposed to report any ethical concerns - according to an online company magazine available on ABB's Korean website.

He was also the head of compliance at ABB in Korea until 2010, said a source familiar with the investigation, a role that carries responsibility for maintaining legal and ethical integrity.

The executive is suspected of forging documents and colluding with third parties to steal funds, ABB said, estimating it would take a pre-tax charge of about $100 million for the affair, which analysts said raised concerns about its corporate oversight.

Oh disappeared on Feb. 7 and ABB subsequently discovered significant financial irregularities, the company said.

Oh, in his late 50s, left for Hong Kong on Feb.4, four days before the company filed a complaint against the executive with the South Korean police, a police official said on Thursday.

The company claimed that he embezzled a combined 35.7 billion won ($31.31 million) in 73 transactions, the official said, adding that police were investigating the man's accounts.

Group Chief Executive Ulrich Spiesshofer described the alleged fraud as "shocking news", which he said could harm the power equipment and industrial firm's reputation.   Continued...

The logo of Swiss engineering group ABB is seen at a plant in Zurich, Switzerland September 29, 2016.  REUTERS/Arnd Wiegmann/File Photo