ABB ABB Ltd

By Brian Blackstone 

ZURICH--Swiss engineering company ABB Ltd. said Wednesday it would likely book a $100 million charge related to a "sophisticated criminal scheme" it said was orchestrated by its now-missing treasurer in South Korea.

ABB said it suspects that the treasurer forged documents and colluded with third parties to steal from the company, before disappearing Feb. 7. The resulting, estimated pretax charge will affect the company's previously reported, unaudited 2016 results, the company said. An ABB spokesman said the company uncovered the theft Feb. 9.

According to an official at Cheonan Seobuk police station in South Korea, ABB said in its complaint filed with authorities that the vanished employee allegedly stole 35.7 billion won ($31.2 million), by sending money to his personal bank accounts in a series of transactions. The difference between the sum identified as stolen and the $100 million charge is the result of findings during the investigation, said a person familiar with the matter.

The treasurer has been identified as Oh Myung-se, the person said. Mr. Oh couldn't be reached for comment.

ABB said it is working with Interpol and local legal authorities probing the matter. As a result of the investigations, the company said it is pushing back publication of its annual report from its scheduled release on Thursday to March 16 at the latest.

ABB shares fell 0.4% in Wednesday trading in Zurich.

The disclosure marks a setback for ABB, whose shares had risen more than 7% so far this year, and adds to the pressure on Chief Executive Ulrich Spiesshofer as he tries to fend off Swedish activist shareholder Cevian Capital AB. ABB in recent weeks announced a string of large orders in its power-grids unit, including a $640 million project to deliver an electricity-transmission link in India, but Cevian has been urging ABB to sell the unit.

In a separate announcement on Wednesday that came at the same time as the disclosure of the South Korea theft, ABB said it has nominated Cevian Capital Managing Director Lars Förberg as a new board member. Cevian Capital owns a stake of about 6% in ABB, according to FactSet data.

Asked whether the huge theft, which raises questions about ABB's internal controls, might strengthen Cevian Capital's hand in its dealings with the company, an ABB spokesman said: "This is a very sophisticated criminal scheme that could hit any company," and ABB has "a zero-tolerance approach" to illegal behavior.

A spokesman for Cevian Capital declined to comment.

In a letter to employees, Mr. Spiesshofer said that beyond the financial impact of the theft, "even more damaging could be the effect this crime will have on the reputation of our ABB."

Mr. Spiesshofer said that based on the large sums involved and the sophistication of the scheme, it is "almost certain" the vanished employee wasn't working alone.

"In all likelihood third parties inside or outside our company were involved," the CEO said. "In our subsidiary in South Korea, our value of integrity was not being lived by everyone nor was our 'Don't look the other way' approach."

Separately, ABB earlier this month said it had unearthed alleged improper payments following an internal investigation into its past dealings with oil-services provider Unaoil Group. U.K. authorities have launched an investigation, which ABB is cooperating with.

In a research note, analysts at Morgan Stanley said they didn't expect the theft reported Wednesday to have much effect on ABB's 2017 earnings.

"The headlines are clearly not appealing, and there may be some legitimate investor questions about oversight," the analysts wrote.

The company said the situation was limited to South Korea, where it employs 900 workers.

In-Soo Nam in Seoul contributed to this article.

Write to Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

February 22, 2017 09:24 ET (14:24 GMT)

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