Hyundai Engineering & Construction (E&C), projected to break the USD 40 billion mark in cumulative overseas orders, seems to be in for an accounting scandal.
Hyundai E&C CFO (chief financial officer) Kim Yeong-tae got the boot from the company just six months after he took the position. In protest, CFO Kim countered by refusing to resign from the Board of Directors of Hyundai E&C, according to a news report, released on July 20 by local newspaper The Hankyoreh.
In January, Kim Yeong-tae was appointed as Hyundai E&C CFO and joined the board of directors on a two-year term.
The Hankyoreh said, “It is extremely rare that a company sacks its CFO, a corporate officer responsible for managing the coffers of the corporation, in just six months.”
According to the report, Kim Yeong-tae sent Hyundai E&C CEO Kim Wee-chul a text message saying, “I’ve found out that there had been grave errors (fraudulent accounting) in the 2014 financial records. You need to order the rectification of errors found in the accounting records for 2014 and the first half of 2015.”
According to Hyundai E&C, Kim Yeong-tae’s departure from the post came because he had difficulty assimilating himself into the organization. And Hyundai E&C told The Hankyoreh that its 2014 final accounts were prepared in a legitimate manner and approved by a supervisory agency.
However, many industry insiders are not buying Hyundai E&C’s explanation. “Kim Yeong-tae has been around the block and knows the ins and outs of the Hyundai Motor Group. He worked his way up to Hyundai E&C CFO. Thus, the excuse that Kim Yeong-tae had issues with organizational assimilation is implausible. It is possible that Kim stepped over the line as the Hyundai Motor Group had shunted him sideways to the post at its affiliate (Hyundai E&C),” an industry insider said.
“The finance department is viewed as one of the lynchpins of every business. Everyone wants to work at the finance department. As a matter of fact, those who have built their career at the finance department are normally promoted to important posts. Therefore, financial officers tend to play it safe and stay non-committal. Thus, his departure is quite surprising,” another business insider said.
So it is possible that Kim’s blowing the whistle on false accounting in the 2014 final accounts of Hyundai E&C came across as an act of insubordination, so the management team led by CEO Kim wee-chul forced him to step down.
The Hyundai Motor Group acquired Hyundai E&C in 2011. Hyundai E&C had received orders worth USD 26.1 billion in the period from 2011 to the first quarter of this year (4 years and 3 months), enjoying the synergetic effects from the Hyundai Motor Group’s absorption of Hyundai E& C.
Hyundai E& C merged with Hyundai Amco in April, thereby rising to 10th place (from 50th) in construction capability and to 2nd place (from 7th) in overseas construction orders. Hyundai E&C also saw its 2014 sales doubling to KRW 5.69 trillion year-on-year and its operating profit reaching KRW 408.4 billion. In April, Hyundai E& C hit the jackpot: it won a huge plant construction deal (worth KRW 5.2 trillion) from Turkmenistan. Hyundai E&C said its cumulative overseas orders would surpass USD 40 billion this year.
Meanwhile, Hyundai E& C’s Public Relations Office did not return The Korea IT Times’ phone calls, saying all the PR officers were in the middle of a meeting.
