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    Securities-Related Class Action Law Suit against GS E&C

    1. Background of the Suit GS E&C(“the company”) has been involving in many overseas constructions which accounts for nearly 40% of the total revenue of the company. In calculating the amount of revenue, operation income and etc. for the overseas constructions, the company used so-called “the percentage of completion method,” and based on the method, the company disclosed 598 billion won of operation income for the year of 2011 and 160.4 billion won of operating income for the year of 2012. However, as the company disclosed a forward-looking information on April 10, 2013, it estimated that the operating loss and the net loss would be 535.4 billion won (-532% compared to the last quarter of 2012) and 386 billion won (-382%), respectively for the first quarter of 2013. The company explained that upon review of costs for the overseas constructions the expected construction costs for ongoing projects were changed resulting in the sudden additional loss.

    2. Statement of Claim in the Suit The circumstantial evidence, however, seems to show that the company has been overstating the revenue and operating income by underestimating the relevant overseas construction costs until 2012 and reflected all at once the previously un-reflected loss on the first quarter of 2013 by adjusting the expected construction costs. Eventually, it is regarded that the company violated the accounting standard by negligently examining its expected costs causing distorted financial statements to be disclosed to the public. Therefore, the investors who purchased the stocks of the company relying on disclosed financial statements from the year of 2012 could be viewed as victims who suffered damages by overstated stock price. This securities-related class action suit was filed to demand for the compensation of the loss suffered by the investors who purchased the company’s stocks through the market during the period between April 1, 2013, the disclosure date of the company’s annual report and April 10, 2013, the date when the company confessed its accounting fraud(around 10 days), and were damaged by the slump in the stock price.