KNOC Confirms Embezzlement and Illegal Fund Creation at Overseas Subsidiary in Internal Audit... Issues Public Apology

Confirmed by Audit of Kazakhstan Subsidiary
Disciplinary Action and Investigation Requested for Those Involved

Korea National Oil Corporation (KNOC) has issued an official apology and initiated disciplinary action and a request for investigation against those involved, after evidence of employee embezzlement and illegal fund creation was uncovered at its overseas subsidiary.

On January 30, KNOC released an apology, stating that a special audit of its Kazakhstan subsidiary revealed that local employees failed to report embezzlement to headquarters and, in an attempt to cover it up, arbitrarily adjusted petroleum product sales prices and illegally raised approximately $370,000.

Previously, it was reported that after receiving intelligence about the possibility of a multi-billion won fine, the Kazakhstan subsidiary received about $270,000 from a local business partner and allegedly delivered it to an individual believed to be affiliated with the Kazakh government. Additionally, after the embezzlement by a local employee was discovered, there were further allegations that about $100,000 was received from a business partner in an attempt to cover up the incident.

KNOC explained that, in relation to these suspicions, it has been reviewing all aspects of the Kazakhstan subsidiary’s operations-including petroleum product sales and fund management-since September of last year. The audit found that internal controls had been bypassed and funds were raised through improper means.

KNOC announced that it would first impose strict disciplinary measures on employees involved in the illegal fund creation and neglect of internal controls, and would report them to investigative authorities to determine if there are any additional violations. In addition, the company stated it would conduct a comprehensive review of fund management practices and the effectiveness of internal controls at all overseas business sites.

Choi Moonkyu, Acting President of KNOC, stated in the apology, "This incident goes beyond the misconduct of a few employees and reveals fundamental problems in overall internal control and management responsibility," adding, "Such behavior is absolutely unacceptable for a public corporation."

He continued, "We will humbly accept the results of the ongoing audit into the Daewang Whale drilling project, take action according to principles, and disclose the outcome transparently. We take the public’s criticism and reproach seriously, and will develop and implement reform measures to restore trust without delay."