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Authorities probe electronics firms over suspected accounting fraud

All Headlines 10:56 October 24, 2014

SEOUL, Oct. 24 (Yonhap) -- The South Korean customs and financial authorities have launched an investigation into suspicions that a mid-sized electronics firm and its affiliate, championed as some of the fiscally healthiest companies, committed accounting fraud amounting to hundreds of billions of won, state officials said Friday.

According to the officials, the Korea Customs Service (KCS) is looking into allegations that privately-owned Moneual Inc., a manufacturer of computers and other small home appliances, altered the books to inflate its business performance and sold export bonds worth 1 trillion won (US$946.8 million).

Market watchers estimate that Moneual borrowed some 600 billion won from local banks based on the inflated numbers.

"We will file a petition with the prosecution against the owner of Moneual for violating customs laws," a KCS official said.

The Financial Supervisory Service (FSS), a watchdog in charge of overseeing listed firms, is looking into Zalman Tech Co., Moneual's affiliate that makes computer parts, on whether it participated in the parent firm's window dressing. Zalman Tech is listed on the secondary KOSDAQ.

The FSS said it will also inspect local banks who extended loans to Moneual and Zalman Tech based on their fraudulent accounting books.

"We will check the relationship between Moneual and local banks, including Korea Ex-Im Bank, Korea Development Bank, Korea Exchange Bank and Kookmin Bank as well as the banks' loan screening and monitoring process," said an FSS official.

The accounting fraud scandal surfaced after Moneual abruptly lodged for court receivership on Monday. The company was inducted into the so-called 1 trillion won sales club last year after claiming 110 billion won in operating profit.

Shares of Zalman Tech plunged to the daily limit of 14.79 percent on the Seoul bourse on Friday.


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