ABB Ltd, a Switzerland-based technology conglomerate, reported fraud in its South Korea subsidiary Wednesday, leaving a $100 million shortfall in last year's results.
The subsidiary's local treasurer, who is suspected of stealing from ABB, disappeared Feb. 7 after allegedly forging documents and possibly cooperating with a third party in the scheme, Bloomberg reported.
ABB said in a statement on its website that it discovered "significant financial irregularities in South Korea" in what it called a "sophisticated criminal scheme."
"The company immediately launched a full investigation in South Korea engaging independent forensic and legal specialists and collaborating with law enforcement authorities," the company said. "ABB is working with the local police on the investigation and Interpol's engagement.
"This embezzlement and misappropriation of funds will have an impact on the previously reported unaudited 2016 results. Current estimate is a pre-tax charge of approximately $100 million. ABB has initiated mitigating actions to reduce the impact of this criminal activity on its results significantly including recovery of misappropriated funds, legal claims and insurances," the statement continued.
ABB's Chief executive Ulrich Spiesshofer wrote a letter to staff, according to Financial Times, which stated that "based on the large sums involved and the sophisticated fraud, it is almost certain that the employee in question was not acting alone."
Financial Times reported Spiesshofer last week appeared positive about AAB's future after the company had its first increase in quarterly orders in nearly two years. The publication stated news about the South Korea fraud situation will likely raise questions about internal controls at the Swiss business.
"The company has checked and reconfirmed the balances of its global bank accounts and can confirm that this situation is limited to South Korea," the ABB statement said. "ABB has a zero-tolerance approach to unethical behavior and maintains the highest standards regarding integrity and ethical business practices."
ABB said in its statement that because of the South Korea investigation, it will delay the printing of its 2016 annual report to as late as March 16.
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