Trading giant faces allegations related to BioLogics' accounting fraud
By Park Hyong-ki
Politicians and civic groups are calling on the country's financial regulator to open an investigation into Samsung C&T, the biggest shareholder of Samsung BioLogics.
They claim the trading arm of Samsung Group may have cooked its books in the process of merging with Cheil Industries in July 2015 as well, and this could be connected to Samsung BioLogics' fraudulent valuation of Samsung Bioepis.
On Nov. 14, the Securities and Futures Commission (SFC), an investigative body of the Financial Services Commission (FSC) said BioLogics has "intentionally" committed accounting fraud in relation to Bioepis, BioLogics' research and development joint venture with the U.S.-based Biogen.
The allegation was brought up three years ago, when Samsung C&T and Cheil Industries were seeking to merge. Cheil Industries, a fashion and amusement park company, then held a majority interest in Samsung BioLogics. Samsung C&T currently holds a 43.44 percent stake in BioLogics.
The SFC has turned over the case involving the two biotech companies to the prosecution. Samsung BioLogics said it will file an administrative lawsuit to prove its innocence.
Rep. Park Yong-jin of the ruling Democratic Party of Korea urged the regulator to look into Samsung C&T's books for irregularities.
"We uncovered an internal Samsung document indicating accounting problems at Samsung C&T at the time of the merger," Park told the press.
"The regulator should get to the bottom of this."
Park provided evidence of BioLogics' accounting irregularities during the Financial Supervisory Service's (FSS) probe.
Rep. Sim Sang-jung of the Justice Party also demanded the prosecution extend its investigation into Samsung C&T's bookkeeping, while looking into BioLogics' accounting fraud.
She said the case is starting to look more like the Enron scandal in the early 2000s.
U.S. financial authorities found the U.S. energy company recorded profits instead of losses on its books by using a different accounting method. BioLogics also used a different method to "intentionally overvalue" Bioepis ahead of BioLogics' listing in the stock market, according to the SFC.
People's Solidarity for Participatory Democracy issued a statement, urging financial authorities and the prosecution to further investigate, adding the country's punishment on corporate accounting fraud remains "too light."
Samsung C&T declined comment, only mentioning, "BioLogics has made an official statement" in response to the latest regulatory decision.
At the time, the construction and trading arm of Samsung Group had faced criticism from some shareholders, including U.S. hedge fund Elliot Management, and politicians.
Then, the allegation was Samsung C&T undervalued Cheil Industries so that it would cost less for Samsung's apparent heir Lee Jae-yong to solidify his control over the group's key companies, including Samsung Electronics.
Since the merger between the trading and fashion companies, Lee's ownership in Samsung C&T has increased to 17 percent, making him its biggest shareholder. And through Samsung C&T, he controls Samsung Electronics, according to their audit filings.
By Park Hyong-ki
 |
| Samsung C&T / Yonhap |
They claim the trading arm of Samsung Group may have cooked its books in the process of merging with Cheil Industries in July 2015 as well, and this could be connected to Samsung BioLogics' fraudulent valuation of Samsung Bioepis.
On Nov. 14, the Securities and Futures Commission (SFC), an investigative body of the Financial Services Commission (FSC) said BioLogics has "intentionally" committed accounting fraud in relation to Bioepis, BioLogics' research and development joint venture with the U.S.-based Biogen.
The allegation was brought up three years ago, when Samsung C&T and Cheil Industries were seeking to merge. Cheil Industries, a fashion and amusement park company, then held a majority interest in Samsung BioLogics. Samsung C&T currently holds a 43.44 percent stake in BioLogics.
The SFC has turned over the case involving the two biotech companies to the prosecution. Samsung BioLogics said it will file an administrative lawsuit to prove its innocence.
Rep. Park Yong-jin of the ruling Democratic Party of Korea urged the regulator to look into Samsung C&T's books for irregularities.
"We uncovered an internal Samsung document indicating accounting problems at Samsung C&T at the time of the merger," Park told the press.
"The regulator should get to the bottom of this."
Park provided evidence of BioLogics' accounting irregularities during the Financial Supervisory Service's (FSS) probe.
Rep. Sim Sang-jung of the Justice Party also demanded the prosecution extend its investigation into Samsung C&T's bookkeeping, while looking into BioLogics' accounting fraud.
She said the case is starting to look more like the Enron scandal in the early 2000s.
U.S. financial authorities found the U.S. energy company recorded profits instead of losses on its books by using a different accounting method. BioLogics also used a different method to "intentionally overvalue" Bioepis ahead of BioLogics' listing in the stock market, according to the SFC.
People's Solidarity for Participatory Democracy issued a statement, urging financial authorities and the prosecution to further investigate, adding the country's punishment on corporate accounting fraud remains "too light."
Samsung C&T declined comment, only mentioning, "BioLogics has made an official statement" in response to the latest regulatory decision.
At the time, the construction and trading arm of Samsung Group had faced criticism from some shareholders, including U.S. hedge fund Elliot Management, and politicians.
Then, the allegation was Samsung C&T undervalued Cheil Industries so that it would cost less for Samsung's apparent heir Lee Jae-yong to solidify his control over the group's key companies, including Samsung Electronics.
Since the merger between the trading and fashion companies, Lee's ownership in Samsung C&T has increased to 17 percent, making him its biggest shareholder. And through Samsung C&T, he controls Samsung Electronics, according to their audit filings.
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