Damage Suit against Employee
Daewoo International, a subsidiary of the POSCO Group, filed a claim for damages against its former employee for tens of billions of won in derivative transaction losses. The court ruled against the company though.
Judge Lee Tae-soo at the Seoul Central District Court ruled against the plaintiff on March 6 in its civil suit against the former BTX Team manager who was in charge of the sale of benzene, toluene and xylene.
The BTX Team was engaged in intermediary trade for buying paraxylene from paraxylene producers and selling it to firms producing purified terephthalic acid (PTA) from paraxylene. Specifically, the team was engaged in forward paraxylene transactions from September 2009, in which the material was delivered a certain period of time after the conclusion of contracts at the price at the time of the delivery.
Daewoo International continued to post losses and the losses amounted to US$17 million or so in February 2011. In the following month, the company reflected the losses from the forward transactions in its business report and informed the Financial Supervisory Service of its violation of accounting standards. Two months later, it submitted a corrected report, saying the amount of the losses was 19.659 billion won.
Daewoo International thought that the former manager did not inform his bosses of the fact that he was engaged in the forward transactions in spite of the high risks of the transactions. In addition, the company considered him to have violated the duty of care in his employment contract by conducting speculative transactions, incurring the losses and lacking a rational investment decision in the risky transactions. The company claimed that the former manager pay the corrected amount. In response, the former manager claimed that he reported the fact and details of each transaction to his superior officers and the losses were not his fault.
The court heard from other Daewoo International employees and reached a conclusion that the superior officers were aware of the losses and thus the former manager should not be responsible. “The paraxylene transaction documents drawn up between January 2009 and February 2011 have the signatures of managing directors and senior managing directors,” the court said, adding, “The losses cannot be ascribed to the former manager’s imprudence.”