Kyobo files complaint against Deloitte Anjin

By Kim Bo-eun

Kyobo Life Insurance's headquarters in central Seoul / Korea Times file

Kyobo Life Insurance said Tuesday that it had filed a complaint against Deloitte Anjin with the U.S. Public Company Accounting Oversight Board.

The life insurer said the accounting firm violated standards when calculating the fair market value of “put options” held by four of its major investors, including the Hong Kong-based Affinity Equity Partners.

A put option is a contract that provides the owner with the right to sell an asset at a pre-determined price in a specified time frame.

"There are many features of the appraisal that are inconsistent with an objective and rational appraisal and audit practices," a Kyobo official said.

Kyobo said the complaint was filed based on “tangible and intangible damage to business, such as extended disputes with shareholders and harm to the stability of management, as well as reputation.”

In 2012, Kyobo Life Insurance Chairman Shin Chang-jae signed a contract with a consortium of four of the insurer's investors, which included put options.

The contract stated the consortium of investors could exercise the put options if Kyobo Life did not go public within three years.

After Kyobo failed to do so by the specified time, the investors exercised the put options on October 23, 2018, but the Kyobo chairman refused to honor them, taking issue with the contract.

The consortium filed a request with the International Council for Commercial Arbitration last year for arbitration on the matter. Proceedings are ongoing.

Kyobo said the put options value set by Deloitte was overvalued because it was not based on the date the options were exercised.

"The put option was exercised Oct. 23, 2018, but the fair market value proposed by Deloitte was calculated based on the share prices of comparable companies during the one year period through June 30 of the same year,” the Kyobo official said.

Kyobo explained the share prices of comparable life insurers such as Samsung Life and Orange Life reached their peak at the end of 2017 and beginning of 2018, which resulted in an overvaluation.

Deloitte stated that the share price should be 409,912. The four investors bought Kyobo shares at 245,000 won when the put option contract was signed.

Kyobo said it will file a compensation suit against Deloitte Touche Tohmatsu, which oversees Deloitte Anjin.

A Deloitte Anjin spokesperson said "Deloittee Anjin conducted the evaluation of the stock in accordance with professional standards, as well as the service contract with financial investors. We find any legal action against Deloitte Anjin completely groundless."

Deloitte Anjin is the Korean unit of Deloitte Touche Tohmatsu, providing services including accounting audits and consulting.