Doosan Enerbility faces record $15 mn in fines for improper bookkeeping

South Korea's major power plant builder Doosan Enerbility Co. faces a record-breaking fine to the tune of about 20 billion won ($15 million) over its inappropriate bookkeeping from 2017 to 2020 related to losses from an Indian power plant project.

The Securities and Futures Commission, a decision-making body of Korea’s financial regulator, the Financial Services Commission (FSC), said on Wednesday that the company showed “serious negligence” by not reflecting huge losses from the Indian project in its annual financial statements.

The decision-making body, however, concluded that Doosan’s actions were deemed not “intentional” and that it won’t be subject to tougher penalties such as a suspension of its shares on the Kospi market and a transfer of the case to the prosecution for criminal punishment.

Nevertheless, Doosan will be fined some 20 billion won for its wrongdoing – a decision the Securities and Futures Commission will finalize in the coming weeks.

HEAVIER PENALTIES THAN THE CELLTRION CASE

The amount, if confirmed, would be the highest-ever for accounting irregularities in Korea, far exceeding a combined 13 billion won in fines levied on Celltrion Inc. and its two affiliates in 2022.

Wednesday’s FSC decision follows years of the regulator’s investigation into allegations that Doosan Enerbility tried to conceal a nearly 300 billion won loss from a 2.8 trillion won project to build two thermal power plants in India.

Doosan’s Indian subsidiary, Doosan Power Systems India (DPSI), won the order in 2016.

The next year, Doosan booked 31.9 billion won in losses from the project. The company also booked losses of 29.1 billion won in 2018 and 44.4 billion won in 2019 from the Indian project. Such losses, however, surged to 331.4 billion won in 2020.

Samjong KPMG, which reviewed Doosan’s financial books at the time, approved the plant maker’s calculations as qualified in its audit reports.

However, some politicians claimed that Doosan Enerbility intentionally shut its eyes to the losses in the first three years to exaggerate earnings.

In response, Doosan said it couldn’t properly reflect such losses on its balance sheets from 2017 through 2019 because it had been in dispute with its Indian clients over which side was responsible for soaring raw material costs.

A Doosan official said on Wednesday that the financial regulator’s decision would remove any lingering uncertainty surrounding the company concerning the allegations.

“We will improve our accounting transparency and strengthen the internal accounting management system to meet the high business practice standards required of us by our shareholders,” he said.

Doosan Enerbility, formerly Doosan Heavy Industries & Construction Co, is Korea’s leading nuclear power plant builder, winning several big deals overseas, including those from Egypt and Saudi Arabia.

Write to Byeong-hwa Ryu at hwahwa@hankyung.com

In-Soo Nam edited this article.