A $100M hole
Disappeared exec’s ‘criminal scheme’
A Swiss engineering company on Wednesday discovered that it had been the victim of a massive $100 million fraud — an inside job brazenly masterminded by an executive in its South Korea unit.
The treasurer of an ABB subsidiary in Seoul, believed to be behind the rip-off, disappeared on Feb. 7. The company discovered the alleged crime two days later.
“The treasurer of the South Korean unit is suspected of forging documentation and colluding with third parties to steal from the company,” ABB said in a statement on Wednesday.
Quoting a source, Reuters identified the suspected insider as Oh Myeong-se. After he disappeared, ABB discovered significant financial irregularities.
“On Feb. 9, we became aware of suspected financial irregularities in South Korea and we immediately launched an investigation,” ABB spokesman Saswato Das said.
“Given the size of the scheme, the investigation may expand to third parties inside and outside of ABB in South Korea,” he said in a statement.
The company’s South Korean subsidiary declined to comment.
ABB called the incident a “sophisticated criminal scheme.”
The company is expected to take a $100 million pretax charge as a result of the theft.
ABB Chief Executive Ulrich Spiesshofer described the alleged fraud as “shocking news” which he said could dent the power equipment and industrial company’s reputation.
“The entire ABB group — all 132,000 of us — will have to live with the consequences,” Spiesshofer told staff in a letter after the company said it had uncovered the significant embezzlement and misappropriation of funds, Reuters reported.
ABB, which already faces an investigation into suspected bribery and corruption in Britain, has been under pressure from activist shareholders due in part to a shrinking order book, although Spiesshofer won some breathing space when the firm posted the first uptick in new business in nearly two years in the fourth quarter of 2016.
Separately on Wednesday, ABB announced that it nominated Cevian founder Lars Förberg to its board.
Cevian is ABB’s secondlargest shareholder, with a 6.2 percent stake in the company. The Swiss-based hedge fund had long argued for ABB to break up, telling the Financial Times in September that its current structure was “too complex.”
Representatives from Ce- vian were not available to comment on the fraud.
ABB said the alleged theft was limited to South Korea, where it employs around 800 people and generated sales of $525 million in 2015. Shares of ABB ended the day down by less than 1 percent on the Swiss stock exchange.
The entire ABB group — all 132,000 of us — will have to live with the consequences. — ABB CEO Ulrich Spiesshofer