ABB likely to take US$100mil charge due to fraud

ZURICH: ABB said it will likely have to take a US$100mil pre-tax charge on its 2016 results after a “sophisticated criminal scheme” came to light in South Korea and the treasurer of its subsidiary in the country went missing.

ABB has uncovered a sophisticated criminal scheme related to a significant embezzlement and misappropriation of funds in its South Korean subsidiary,” the power generation equipment and industrial automation maker said in a statement yesterday.

“The treasurer of the South Korean unit is suspected of forging documentation and colluding with third parties to steal from the company,” ABB said.

The alleged scam is the second scandal to rock ABB in a month, after the Serious Fraud Office in Britain opened an investigation into suspected bribery and corruption company’s activities in the UK.

The treasurer, who has not been named, disappeared on Feb 7, and subsequently ABB discovered significant financial irregularities, the company said.

“On Feb 9 we became aware of suspected financial irregularities in South Korea and we immediately launched an investigation,” ABB spokesman Saswato Das said.

ABB said the alleged theft was limited to South Korea, where ABB’s business includes providing industrial automation and power generation equipment to the ship-building industry, among others.

The company employs around 800 people in the country, and generated sales of US$525mil in 2015. into the

“Given the size of the scheme the investigation may expand to third parties inside and outside of ABB in South Korea,” said Das.

The South Korean unit declined to comment, when contacted by Reuters.

ABB said it currently estimated a pre-tax charge of around US$100mil and was taking actions to reduce the impact of the fraud. The company said it may delay the publication of its 2016 annual report. ABB reported its 2016 results earlier this month.

Separately, ABB said it nominated Lars Forberg, managing director of Cevian Capital for election to its board.

Cevian, ABB’s second largest shareholder, had called for a separation of the company’s power grids business, an appeal which was rejected by ABB last year. – Reuters