Hana Bank Partially Wins Second Trial in Damages Lawsuit Against Daewoo Shipbuilding & Marine Engineering Over 'Bunsik Accounting'

Government Employees Pension Service and Government Also Win Consecutive Lawsuits

A second-instance court ruling has been issued stating that Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean) and others must pay damages to investors who suffered losses after investing in the company's bonds and the accounting fraud was revealed.

Hanwha Ocean's company name is displayed on the large crane at its headquarters. Hanwha Ocean changed its name from Daewoo Shipbuilding & Marine Engineering.
[Image source=Yonhap News]

According to the legal community on the 22nd, the Seoul High Court Civil Division 12-1 (Presiding Judges Yoon Jong-gu, Kwon Soon-hyung, Park Hyung-joon) partially ruled in favor of the plaintiff, Hana Bank, in the damages claim lawsuit filed against Daewoo Shipbuilding & Marine Engineering and Deloitte Anjin Accounting Corporation (hereinafter Anjin), consistent with the first trial. The court ordered "Daewoo Shipbuilding & Marine Engineering to pay about 1.4 billion KRW, of which about 600 million KRW shall be jointly borne with Anjin," as in the first trial.

On the same day, the Seoul High Court Civil Division 12-3 (Presiding Judges Park Hyung-joon, Yoon Jong-gu, Kwon Soon-hyung) ruled similarly in a lawsuit filed by the Government Employees Pension Service with the same purpose, stating that "Daewoo Shipbuilding & Marine Engineering shall pay about 2 billion KRW, of which about 880 million KRW shall be jointly paid with Anjin," consistent with the first trial.

This court also ruled in a separate lawsuit filed by the government against Daewoo Shipbuilding & Marine Engineering, former President Ko Jae-ho, former Chief Financial Officer (CFO) Kim Gap-joong, and Anjin, stating, as in the first trial, that "Daewoo Shipbuilding & Marine Engineering, former President Ko, and former CFO Kim shall jointly pay about 11 billion KRW, of which about 4.7 billion KRW shall be jointly paid with Anjin."

Between 2014 and 2015, Hana Bank, the Government Employees Pension Service, and the government invested in Daewoo Shipbuilding & Marine Engineering's corporate bonds or commercial paper but suffered losses and filed lawsuits. They claimed that Daewoo Shipbuilding & Marine Engineering, which falsified financial statements through accounting fraud at the time, and Anjin, which audited and expressed an 'appropriate' opinion on them, were liable for compensation.

The first and second-instance courts generally accepted the plaintiffs' claims, except for claims related to some corporate bonds for which the statutory period for claiming damages (prescription period) had expired.

The court stated, "Daewoo Shipbuilding & Marine Engineering falsely recorded matters that could significantly affect the reasonable judgment of corporate bond and commercial paper investors, and Anjin, despite being well aware of this situation, prepared an audit report containing an 'appropriate opinion.' The amount of damage is the difference between the purchase amount by the plaintiffs and the actual value of the corporate bonds and commercial paper that would have been fairly formed if there had been no accounting fraud."

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