The Securities and Futures Commission under the Financial Services Commission decided on the 10th that SK ecoplant's alleged violation of accounting standards was due to "gross negligence." Notably, the FSS had viewed SK ecoplant's motive for the accounting violation as "intentional," but the commission lowered it by one level from the FSS's original proposal.
At its 16th meeting that day, the commission determined that SK ecoplant, which overstated sales at its U.S. subsidiary, had "significant negligence." Accounting violations are categorized as intentional, gross negligence, or negligence. A finding of intent triggers criminal referral and dismissal of executives. With the finding lowered by one level to gross negligence, SK ecoplant received a recommendation to dismiss the responsible executive and a six-month suspension from duties as sanctions.
SK ecoplant faces allegations that it overstated the sales of A, its U.S. fuel cell subsidiary, during its initial public offering process. The FSS had found that the consolidation financial statements were falsely prepared and disclosed, and that there was an incentive to boost corporate value. Accordingly, it determined that accounting standards were intentionally violated. The FSS had therefore decided on a criminal referral, dismissal of the former CEO, and a penalty surcharge.
However, as the commission concluded that "intentionality" was not recognized, SK ecoplant avoided criminal referral. SK ecoplant said, "We will carefully discuss the disposition internally and will continue to strengthen and supplement our subsidiary accounting processes going forward." The amount of the penalty surcharge against SK ecoplant and the former CEO will be finalized later by the Financial Services Commission.