‘Investment Loss Due to Accounting Fraud’ Class Action Against GS Geonseol... Investors Lose After 7 Years

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[Asia Economy Reporter Choi Seok-jin] The class-action lawsuit filed by investors in 2013 claiming they suffered investment losses due to GS Construction's accounting fraud has ended in the investors' defeat after seven years of trial.

On the 18th, the 22nd Civil Division of the Seoul Central District Court (Presiding Judge Hong Ki-chan) ruled against the plaintiffs in the securities-related class-action lawsuit filed by 15 GS Construction investors, including Mr. Kim, against GS Construction.

GS Construction announced operating losses of 535.4 billion KRW and net losses of 386.1 billion KRW in the first quarter of 2013. Subsequently, GS Construction's stock price plunged sharply, hitting the lower limit for two consecutive days, falling by up to 40%.

In response, investors including Mr. Kim filed a lawsuit, claiming they purchased company shares at a high price based on distorted financial information due to GS Construction's accounting fraud and suffered losses.

In court, they argued that "GS Construction underestimated the total contract costs of large-scale overseas plant projects from the beginning or failed to properly adjust the estimated total contract costs according to the progress of the projects, thereby overstating sales and operating profits and causing damage to shareholders."

They particularly took issue with GS Construction's revision of cost estimates related to overseas projects in the first quarter of 2013, which reflected losses all at once.

On the other hand, GS Construction countered that the losses caused by increased costs at the end of 2012 were reflected in the first quarter of 2013 after conducting a cost review of all business sites.

The court ruled in favor of GS Construction.

The lawsuit they filed is a system designed to remedy collective damages arising from securities transactions. If the lead plaintiff wins, related victims who did not participate in the lawsuit can also seek redress.

The initial claim amount of around 400 million KRW increased to approximately 43 billion KRW as the total damages of all victims were reflected during the course of the class-action lawsuit.

This content was produced with the assistance of AI translation services.