ABB uncovers $100-mn South Korean fraud as suspect vanishes

ABB uncovered embezzlement at its South Korean subsidiary after the local treasurer suspected of stealing from the company went missing, leaving a $100 million shortfall in last year’s results.

The suspect, who disappeared February 7, is suspected of forging documents and colluding with third parties in a “sophisticated criminal scheme,” Zurich-based ABB said in a statement on Wednesday. After checking balances of its global bank accounts, the company said the impact is limited to the Asian nation.

The fraud is the second such disclosure this month after the Swiss maker of power grids and robots said February 8 it’s being investigated by the UK Serious Fraud Office after the discovery of improper payments related to another criminal probe. The cases add to the pressure on Chief Executive Officer Ulrich Spiesshofer after activist investor Cevian Capital AB pushed for a breakup of the company. Cevian co-founder Lars Forberg has been nominated for a seat on the board, ABB said in a separate statement Wednesday. While the South Korean case “is unfortunate, we do not expect any major lasting impact,” Vontobel analyst Panagiotis Spiliopoulos wrote in a note to clients. The shares fell 0.3 per cent to 23.08 francs at 11:45 am in Zurich.  The suspected theft will lead to a pre-tax charge of about $100 million on previously reported, unaudited 2016 results, ABB said, adding that it’s collaborating with law enforcement authorities and has hired independent forensic specialists. 

ABB’s legal woes add to challenges posed by its second-biggest shareholder, Cevian, which called for a spin off of the power grids business on the grounds the Swiss industrial company is too complex and difficult to run. In October, Spiesshofer defied the investor and announced ABB would hang on to the business. Cevian’s other co-founder, Christer Gardell, has since vowed to keep pushing ABB for a breakup.

Bloomberg