The Financial Supervisory Service (FSS) has embarked on an investigation into POSCO Engineering & Construction Co. (E&C) for alleged irregularities in overseas operations. This inquiry comes three months after Justice Party spokesperson Choo Hye-sun called for an FSS probe into dubious investments overseas by POSCO affiliates during a parliamentary session last year.
Choo said on Jan. 15, “The FSS has launched an investigation into POSCO E&C on Jan. 10. It is somewhat late but I expect that all the allegations against POSCO affiliates are clearly resolved through a thorough probe.”
Choo first raised corruption allegations against POSCO in July last year when POSCO was selecting a new chairman. She said that POSCO had repeatedly made poor investment decisions and unconvincing accounting errors after it was mobilized for the so-called natural resource diplomacy led by the Lee Myung-bak government. She also pointed out that the firm has been poorly managed after it was abused for corruption scandals during the Park Geun-hye government.
At the parliamentary audit last year, Choo said, “There were accounting problems when POSCO E&C and POSCO Engineering invested in Britain-based EPC Equities and Ecuador-based Santos CMI.” She also said that the FSS needs to begin an accounting investigation. In regard to Choo’s comments, FSS Gov. Yoon Seok-hun said, “We will look into whether POSCO has committed irregularities, including breach of duty.”
Choo said, “POSCO E&C and POSCO Engineering acquired Britain-based EPC Equities and Ecuador-based Santos CMI for 80 billion won (US$71.17 million) in 2011. Although the two firms had incurred losses every year, the POSCO affiliates kept pouring money into it, providing a total of 200 billion won (US$177.94 million) over the following six years through repeated capital increases, acquisitions of additional shares and extension of loans. Then, they sold EPC Equities for nothing and Santos CMI for 6 billion won (US$5.34 million) to original shareholders in 2017.”
In addition, there have been accounting fraud allegations against POSCO affiliates with regard to their investment and asset sales at home and abroad, including the alleged omission of sales and tax evasion in the process of constructing a POSCO building and employee apartments in Songdo and official correction of the 2015 business report after belatedly reflecting a loss of 100 billion won (US$88.97 million) from the Brazil CSP integrated steel mill project in 2017.