Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Seegene vows to prevent recurrence of accounting fraud
Prime Minister Chung Sye-kyun, left, listens to a researcher at Seegene Medical Foundation's laboratory in Seoul, Jan. 6. / Joint press corps
By Park Jae-hyuk
COVID-19 test kit maker fined for cooking the books
By Park Jae-hyuk
Seegene, a local molecular diagnosis company that has drawn attention for its COVID-19 test kits, vowed to practice transparent management to prevent the recurrence of accounting fraud, a day after the financial regulator decided to fine the company for exaggerating its earnings.
The Securities and Futures Commission (SFC), under the Financial Services Commission (FSC), said Monday evening that the fifth-largest company on the tech-heavy Kosdaq market by market capitalization was found to have overstated its sales between 2011 and 2019, by dumping its oversupplied products on its agencies.
The SFC agreed to levy a fine on the firm and to advise it to dismiss the executive who handled it.
The company could be fined more than 500 million won ($450,000), as the SFC said the specific amount of the fine would be finalized in the following FSC meeting. If a fine is to exceed 500 million won, the SFC must defer to the FSC to set the amount.
Seegene said the executive in charge has already left the company, adding it corrected its balance sheet during the third quarter of 2019.
“The regulator's latest measure resulted from our company's relatively poorer management system and lack of experts in the past,” a Seegene official said.
“We have reinforced our accounting experts and implemented our internal accounting management system since last year to improve the insufficiency caused by the lack of experts and system. With the establishment of a compliance and risk management department and the implementation of a global enterprise resource planning (ERP) system, we will do our best to prevent the recurrence of similar accidents.”
After the company announced its reform measures, Seegene's stock price, which opened 5 percent lower than the previous session's closing price, rose gradually and closed at 175,100 won, down 2.78 percent from the previous session's closing price.
Possible next target
However, there still remains concerns that the financial regulator's heavy punishment on the biotech company could have repercussions for the nation's entire biopharmaceutical industry.
Celltrion is mentioned as a “possible next target” because the Financial Supervisory Service (FSS) began to look into its marketing subsidiary, Celltrion Healthcare, in December 2018 over allegations that it committed accounting fraud to the amount of 21.8 billion won, by reselling its exclusive right to Celltrion products to the parent company.
While Celltrion produces and develops biopharmaceutical products, its subsidiary Celltrion Healthcare is in charge of marketing and selling the products. Celltrion is seeking to merge its three affiliates ― Celltrion, Celltrion Healthcare and Celltrion Pharm ― by the end of this year.
At the time when the FSS launched the investigation, Celltrion Healthcare said the transaction was a legitimate part of corporate accounting.
“We consider profits made from exercising an exclusive sales right we hold as sales. Such sales activities are also in compliance with International Financial Reporting Standards,” it said.
Industry officials said the financial watchdog has yet to draw a conclusion for its two-year investigation into whether or not the largest company on the Kosdaq market in market cap had cooked the books.