Allegations of Malpractice
SK Shipping (CEO Baek Seok-hyun) is under police investigation for alleged mismanagement.
The Seoul Metropolitan Police Agency announced on Oct. 13 that five of its executive members did damages to the company worth 50 billion won (US$46.8 million) in 2008 through forward freight agreements (FFA).
In the third quarter of 2008 alone, the London branch of the company recorded business losses of 171 billion won (US$160 million) via FFAs, resulting in severe capital impairment. SK Shipping made investment of 67 billion won (US$62 million) via a ship broker in order to recover the losses, and ended up losing only the 50 billion won.
A FFA is a derivative financial product that is used to avoid risks associated with charterage and freight charge fluctuations. The police are investigating the legitimacy of the futures investment decision and the background of the commissioning of the FFAs. At the same time, the police are looking into the flow of the funds obtained by the futures transactions, and the investigation could be expanded to cover the entire company's slush fund.
A police officer recently said that he confirmed unlawful acts during the course of the months-long investigation.