Kyobo Life seeks US sanctions against Deloitte Anjin

Kyobo Life Chairman Shin Chang-jae.

By Lee Kyung-min

Kyobo Life Insurance said Friday that it has filed a petition with a U.S. non-profit audit organization, seeking sanctions against Deloitte Anjin over the accounting firm's suspected irregularities in the calculation of the life insurer's total share value in 2018.

This is the latest development in a protracted dispute between Kyobo and a consortium of its financial investors led by Affinity Equity Partners, a Hong Kong-based private equity firm, over a 2 trillion won ($1.6 billion) put option. Among the investors are IMM Private Equity, Baring Private Equity and GIC, the Singaporean sovereign wealth fund.

The Life insurer says Deloitte Anjin accountants are under suspicion of accounting law and ethics violations in 2018, in the midst of a put option being exercised by the investors on Kyobo Life Chairman Shin Chang-jae.

Shin signed a contract with the consortium in 2012, which included a put option. The contract stated that the consortium of investors could exercise the put option if Kyobo Life failed to go public within three years.

Kyobo failed to carry out an IPO within the specified time frame and the investors exercised the put option on Oct. 23, 2018. The consortium presented a value of 409,912 won for Kyobo's stock at the time, but Shin refused to honor the put option, taking issue with the contract.

The overvaluation, Kyobo says, was the key point of contention in the drawn-out dispute with the investors, saying a judgment by the Public Company Accounting Oversight Board (PCAOB) will help clarify the issues.

“We plan to put an end to the years-long feud once and for all,” a Kyobo official said. “The U.S. organization is known for the highest, the most stringent standards of ethics and morals of accountants. We understand ethics violations are met with severe disciplinary actions in the U.S.”

Meanwhile, a trial is ongoing at the Seoul Central District Court on the indictment of three Deloitte Anjin officials and two Affinity consortium officials on charges of collusion and violating laws governing certified public accountants.

Prosecutors sought between one-year and 18-month prison terms for each of the five, claiming that they orchestrated a plan whereby Deloitte Anjin officials wrote a put option-related stock valuation report in a way that strengthened the case for Affinity at the request of the private equity firm's officials. A ruling is expected in February.