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Questions mount over Samsung accounting case

By Maggie Lynch

- Last updated on GMT

(Image: Getty/Motortion)
(Image: Getty/Motortion)

Related tags: Samsung biologics, Samsung bioepis, Biogen, South korea

An executive at Samsung is issued an arrest warrant, as prosecutors in South Korea continue to look into the accounting case leading up the IPO of Samsung BioLogics.

The case sees a venture between Biogen and Samsung BioLogics to create Samsung Bioepis called into question, under the possibility of accounting fraud.

The original venture saw Samsung BioLogics, a South Korean contract development and manufacturing organization (CDMO), owning 85% of Samsung Bioepis and Biogen owning 15% -- with Samsung BioLogics allegedly miscalculating the value of its stake in Samsung Bioepis to report a sudden profit in 2015 prior to its initial public offering (IPO).

The Financial Times reported​ that the warrant for the arrest of the senior executive at Samsung, suggested by local media​ to be president of Samsung Electronics, Chung Hyun-ho, came after they allegedly decided to destroy or manipulate documents relating to the accounting data for Samsung BioLogics and Samsung Bioepis.

In July 2018​, the Securities and Futures Commission (SFC) began conducting an investigation into the account falsification and concluded that Samsung BioLogics had not disclosed that Biogen, a partner in its venture Samsung Bioepis, had the option to up its stake to 49.9%.

The SFC released a statement on the case: “Samsung BioLogics had violated accounting standards by intentionally omitting information regarding its join venture agreement with Biogen in its public disclosure; therefore, the SFC approved measures against Samsung BioLogics – request for dismissal of executives in charge; designation of external auditors for three years; and referral of the case to prosecutors.”

The month prior to this statement, June 2018, saw Biogen exercise its option​ to increase ownership of Samsung Bioepis through a $700m (€600m) payment.

After the accounting investigation, Samsung BioLogics threatened to sue​ the Korean government as the CMO saw an immediate 20% drop in its share price, resulting in the company losing around $6bn in value. At present, the company’s share price is still down by 27% from this time last year.

Update: A previous version of this article had suggested that the warrant for arrest had been issued to an executive of Samsung BioLogics, this has been removed.

Related topics: Markets & Regulations

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