Regulator asks prosecutors to probe accounting breaches at Samsung BioLogics

November 20, 2018

SEOUL, Nov. 20 (Yonhap) — South Korea’s financial regulator formally asked state prosecutors on Tuesday to launch a criminal probe into accounting breaches at Samsung BioLogics Co., a move that is expected to deal another blow to the biotechnology unit of Samsung Group.

After a regulatory review that has lasted months, a panel of the Financial Services Commission (FSC) ruled last Wednesday that Samsung BioLogics intentionally inflated the value of its affiliate, Samsung Bioepis Co., ahead of its listing in 2016.

Trading of Samsung BioLogics shares has been suspended since the ruling was announced and the listing of its shares on the local bourse is under review.

The regulatory review centers on questions about Samsung BioLogics’ sudden profits in 2015 after years of losses. Samsung BioLogics reported a net profit of 1.9 trillion won (US$1.68 billion) that year after changing the method used to calculate the value of Samsung Bioepis, which is a joint venture with the U.S.-based Biogen Inc.

Samsung BioLogics, which has claimed that the change of accounting methods was in line with international accounting standards, said it would file an administrative lawsuit against the ruling.

Samsung BioLogics said on its website that it protests against the financial regulator’s decision, adding that it will make the utmost efforts to prove that its accounting methods were appropriate because the confidence of its customers and investors is at stake.

Before Samsung BioLogics went public in 2016, Samsung Electronics and Cheil Industries Inc. each owned 40 percent stakes in the biosimilar maker.

People’s Solidarity for Participatory Democracy, an influential South Korean civic group, has argued that Samsung BioLogics may have inflated its profit to raise the value of the company for the benefit of Samsung Group’s heir apparent, Lee Jae-yong, who held a major stake in Cheil Industries at that time.

The civic group has said the suspected accounting breaches at Samsung BioLogics may have helped the controversial takeover of Samsung C&T Corp. by Cheil Industries Inc. in 2015.

The merger of the two Samsung units was widely seen as a step to enhance Lee’s control of Samsung Group, as his father Lee Kun-hee suffered a heart attack in 2014 and has been hospitalized ever since.

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