Embattled Swiss engineering company ABB has uncovered a “sophisticated criminal scheme” at its South Korean subsidiary which has left a $100 million (€94.6 million) black hole in the technology conglomerate’s 2016 results.
In a statement released yesterday, the company said the treasurer of its South Korean robotics unit is suspected of having forged documents in collusion with third parties in a successful bid to defraud the company of tens of millions of dollars.
ABB said the employee concerned went missing on 7 February, prior to its accountants discovering financial irregularities which point to embezzlement.
Speaking with the Reuters news agency, a South Korean source identified the suspect as Oh Myeong-se, who worked as treasurer and integrity ombudsman at ABB Korea. Part of his job was to deal with ethical concerns raised by staff members, according to ABB’s Korean website.
Working with local law enforcement and Interpol, the company said it had launched a full investigation in South Korea involving independent forensic and legal specialists.
“This embezzlement and misappropriation of funds will have an impact on the previously reported unaudited 2016 results,” ABB said in its statement.
“Current estimate is a pre-tax charge of approximately $100 million. ABB has initiated mitigating actions to reduce the impact of this criminal activity on its results significantly, including recovery of misappropriated funds, legal claims and insurances.”
One person close to the company said an increase in the estimated loss could not be ruled out once further investigations have been concluded.
Ulrich Spiesshofer, the company’s CEO, wrote a letter to staff describing the suspected fraud as “shocking news”.
“The entire ABB group – all 132,000 of us – will have to live with the consequences,” he wrote.
“Based on the large sums involved and the sophisticated fraud, it is almost certain that the employee in question was not acting alone.”
The discovery of the fraud comes at a time when ABB is already under investigation by Britain’s Serious Fraud Office (SFO) over allegations of corruption and bribery in its UK business.
“The SFO confirms that it has commenced an investigation into the activities of ABB’s United Kingdom subsidiaries, their officers, employees and agents for suspected offences of bribery and corruption,” the SFO said in a statement earlier this month.
The SFO probe is linked to the agency’s ongoing investigation into the activities of Unaoil, which has been accused of corruptly securing contracts for dozens of multinational companies. ABB is said to be cooperating with the SFO over enquires into its past dealing with the Monaco-based firm.
ABB failed to release its annual report as planned yesterday as a result of the South Korean revelations, announcing the unveiling of its results would now be pushed back to 16 March at the earliest.