[Exclusive] Doosan Enerbility's 'Accounting Violation' Suspicion, FSC Delays Discussion

The 증선위 Takes Over the 'Compromise Plan' from the Inconclusive 감리위
Disciplinary Level Vote Postponed as Agenda Not Presented Until Morning
Significant Differences in Views... Subtle Tensions Between 금융위 and 금감원 Also Play a Role

The Financial Services Commission's Securities and Futures Commission (SFC) has postponed the disciplinary level decision discussion regarding Doosan Enerbility, which is under suspicion of accounting violations. Initially, the Financial Services Commission planned to hold an SFC meeting on the 24th to discuss the agenda related to Doosan Enerbility's accounting violation suspicions, but internal differences over the possibility of intentional accounting fraud delayed the decision. While the Financial Supervisory Service emphasized intentional omission and insisted that severe disciplinary action is inevitable, some within the Financial Services Commission believe it cannot be seen as intentional fraud. As a result, the calculation of whether Doosan Enerbility committed accounting violations is becoming complicated due to the subtle tension between financial and supervisory authorities.

According to financial authorities, the SFC was scheduled to discuss the agenda related to Doosan Enerbility's accounting violation suspicions on that day but did not hold the meeting itself. This indicates that it is a difficult and complex issue to reach a consensus on, and more time is needed to reach a conclusion. The SFC is expected to further verify the facts regarding Doosan Enerbility's accounting treatment before the next meeting. A source familiar with Doosan said, "I heard that the SFC meeting scheduled for that day was postponed."

The core issue of this controversy is whether Doosan Power Systems India (DPSI), Doosan Enerbility's local subsidiary in India, properly accounted for losses caused by cost increases related to the Jawaharpur and Obra-C thermal power plant projects, totaling 2.8 trillion won, which were ordered at the end of 2016. The Financial Supervisory Service began an audit procedure in April 2021 and judged that Doosan Enerbility, after winning the contract, recognized the cost increases but did not reflect losses of about 300 billion won in advance during 2017-2019. It submitted the case to the audit committee, an accounting expert body under the Financial Services Commission, in August last year. The company stated that the delay in reflecting the losses was due to disputes over sharing the cost increases with the client, not because of intentional delay.

During the audit committee's discussion of the case, there was a heated debate among the auditors over whether the omission was intentional, and no conclusion was reached. The audit committee maintained the Financial Supervisory Service's original disciplinary proposal of "severe disciplinary action including intentional acts" but attached various opinions from the auditors and submitted the case to the SFC. In fact, this was a compromise plan that attached the auditors' opinions to the Financial Supervisory Service's original disciplinary proposal.

The final conclusion is expected to be made through the SFC's resolution, but there has been noise due to internal disagreements from the agenda submission stage. Since the SFC regular meetings are usually held every other Wednesday, the agenda may be resubmitted on February 7, two weeks later. However, due to the complexity of the issue, it is unlikely that a conclusion will be reached soon. A financial authority official said, "Even until the morning of that day, there was no internal coordination on whether to submit the agenda."

In the industry, considering that debates continue from the early disciplinary stage at the audit committee, it is expected that the disciplinary level will be lowered from intentional to gross negligence when it goes to the SFC. The SFC decides the disciplinary level along with the scale of fines. The Financial Supervisory Service is known to have notified Doosan Enerbility of a fine of 40 billion won, the largest ever imposed.

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