Feud between FSC and Samsung BioLogics deepens

Samsung BioLogics CEO Kim Tae-han

By Jhoo Dong-chan

A feud between the Financial Services Commission (FSC) and Samsung BioLogics has been deepening as the two sides continued to trade barbs since the regulator ruled Nov. 14 that the firm violated accounting rules before the firm went public in 2016.

The biopharmaceutical arm of Samsung Group said on its website, Tuesday, that its accounting practice has never violated accounting rules, and is totally different from the fraudulent accounting cases of U.S.-based Enron and Daewoo Shipbuilding & Marine Engineering.

“Our case is simply a matter of judgment as to whether changing the status of Samsung Bioepis from a subsidiary to an affiliate complies with the International Financial Reporting Standards (IFRS),” it said.

“The nation's three largest accounting firms already judged that our accounting practice complied with the IFRS. But the financial authorities interpreted it in a different way.”

The Securities and Futures Commission (SFC), the auditing unit of the FSC, immediately rebutted Samsung BioLogics' claim.

“Samsung BioLogics is reiterating its argument over and over again,” the SFC said in a press release.

“The SFC has thoroughly reviewed the case based not only on the company's explanatory materials but also on the IFRS and Financial Supervisory Service's data. Samsung BioLogics should stop reiterating its position for its own good while taking the full responsibility to protect its investors.”

Financial Services Commission Chairman Choi Jong-ku

FSC Chairman Choi Jong-ku took a wait-and-see approach.

“The SFC has already made its decision. The case is now under legal process. We will see how it unfolds,” he told reporters, Wednesday.

Experts said Samsung BioLogics should accept the financial regulator's verdict on the case.

“It was a breach then, and still is now,” an industry insider who is familiar with the issue said.

“I think the SFC's ruling is fair and valid so the company should follow.”

The SFC looked into and released its decision on allegations the biopharmaceutical company's sudden profit in 2015 following years of losses was because of fraudulent accounting.

The firm reported a net profit of 1.9 trillion won that year after changing the method used to calculate the value of its core affiliate Samsung Bioepis.

Thanks to the surging market value of Samsung Bioepis, its part owner Samsung BioLogics said it conducted a corporate valuation based on this instead of acquisition value, following the approval of copies of core biotech drugs.

The possible accounting fraud claim first surfaced after a local activist group, the People's Solidarity for Participatory Democracy (PSPD), questioned the integrity of the company's 2015 books.

At a media briefing, Nov. 14, FSC Vice Chairman Kim Yong-beom said the company cooked its books by inflating net profits before it went public in 2016. Under the ruling, trading of Samsung BioLogics' shares has been suspended on the Seoul bourse.