The former chairman of Korea's collapsed electronics and industrial giant, Daewoo, has appeared in a Seoul court on charges of fraud.

Prosecutors say Kim Woo-choong employed fake letters of credit (L/Cs) as well as illegally doctored accounts to fraudulently obtain millions of US dollars.

Charges

At the start of the trial that began earlier this month, Kim said he would take responsibility for an accounting fraud amounting to nearly US$40 billion.

Prosecutors charge Kim with ordering a US$39 billion accounting fraud, illegal financing amounting to US$9.7 billion and the diversion of US$23 billion out of the country.

Fake L/Cs

Kim allegedly falsely inflated the assets of four Daewoo subsidiaries and made illegal borrowings by using doctored accounts and fake L/Cs.

He fled South Korea in 1999 and returned earlier this summer.

Daewoo has been in a debt workout programme since early 2000, after collapsing under nearly US$80 billion in debt the previous year.

Common fraud

Kim told the court that in the late 1990s, it was not unusual for large companies operating in the country to doctor their books and obtain bank loans.

In 2002, regulators in South Korea launched an intensive probe into trade financing transactions between companies and banks (DC World News, 26 September 2002). The Financial Supervisory Service (FSS) announced the initiative days after it said Ssangyong Corp had obtained 114 billion (US$95 million) from banks with fake and forged bills (DC World News, 10 September 2002).

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