Kyobo urges regulator to launch investigation into Anjin

Kyobo Life Insurance Chairman Shin Chang-jae delivers a speech during the firm's New Year seminar at its headquarters in Seoul on Jan. 8. Courtesy of Kyobo Life Insurance

By Lee Min-hyung

Kyobo Life Insurance has urged the nation's financial authorities to investigate Deloitte Anjin accountants over their suspicious internal trading with a client ― Hong Kong-based Affinity Equity Partners ― the life insurer said Tuesday.

Kyobo and its financial investor ― an Affinity-led consortium ― are in a months-long legal dispute regarding Anjin's alleged involvement in apparent accounting fraud by manipulating Kyobo's corporate value at the request of the client.

Prosecutors are looking into whether three Anjin accountants colluded with Affinity to distort Kyobo's pre-initial public offering (IPO) stock price.

But the insurer considered the ongoing investigation “not enough” and presented a petition recently to the two financial authorities here, the Financial Supervisory Service (FSS) and Financial Services Commission (FSC), asking them for a thorough investigation.

Kyobo insisted the accounting firm should face heavy sanctions if the business malpractice is verified.

“The nation's financial and capital market order will be shaken if such illegal and unfair behavior between an accounting firm and officials from a private equity firm is tolerated,” a spokesman at Kyobo said. “We hope the financial watchdogs will root out the business malpractice and impose harsh punishments to prevent a recurrence.”

The financial overseers, upon receiving a petition from market players, typically notify the Korean Institute of Certified Public Accountants of relevant cases. The institute then holds an ethics committee meeting and reviews whether to take any disciplinary action.

The latest decision by Kyobo came in response to the consortium's repeated attempts to misconstrue the facts surrounding a prosecution indictment, according to Kyobo.

“The consortium and Anjin are distorting facts and showing an attitude disregarding the authority of the judicial authorities,” the spokesman said.

Kyobo went on to say that the legal dispute is hurting the reputation and management stability of the insurer.

“The authorities are expected to correct the business malpractice regarding the suspicious activity between an accounting firm and its client, so that no other companies fall victim to any additional cases,” the official said.

Late last month, the Affinity consortium dropped a lawsuit against Kyobo Life Insurance Chairman Shin Chang-jae, in an abrupt move amid the escalating conflict. Some observers argued this was part of the consortium's strategic move to focus on an upcoming settlement by the International Chamber of Commerce (ICC), rather than staying engaged in a war of nerves with Kyobo in the Korean market.

The dispute between Kyobo and the financial investor was initiated due to huge differences in estimations of Kyobo's pre-IPO share price.

The insurer was scheduled to go public in 2015. But with the company delaying the timeline, the financial investment consortium led by the Affinity exercised its right to withdraw its investment from the insurer. The consortium demanded Shin buy back its shares at 409,000 won, which the insurer declined to accept.

The arbitration result is expected to come sometime in the latter half of this year.