Samsung execs jailed over alleged fraud at CDMO unit

By Nick Taylor

- Last updated on GMT

(Image: Getty/erenmotion)
(Image: Getty/erenmotion)

Related tags: Samsung biologics, CDMO, Regulations, Fraud

South Korean court gives jail terms to Samsung executives for alleged destruction of evidence.

The executives worked at Samsung Electronics but the actions that will land them in jail for up to two years relate to Samsung BioLogics, the contract development and manufacturing organization (CDMO) wing of the South Korean conglomerate.

Prosecutors accused the executives of ordering employees to destroy and hide evidence ahead of a probe into accounting practices at the CDMO, according to government-funded South Korean news agency Yonhap.

The alleged cover up entailed hiding computers, notebooks and computer servers under the floors of facilities run by Samsung BioLogics, according to Reuters. The judge was unimpressed by the actions of the defendants.

Judge Soh Byung-seok said, “The boldness of the defendants’ criminal acts was beyond the public’s imagination and stunned society​.”

Earlier in the legal case, the court heard how the accused admitted deleting data, according to Korea Biomedical Review. The data was deleted ahead of a raid by officials investigating Samsung BioLogics.

The accusations against the executives are tied up with scrutiny of Samsung BioLogics’ accounting practices, which caught the attention of South Korean financial regulator, the Financial Supervisory Service (FSS).

Last year, a FSS probe led to the accusation that Samsung BioLogics breached accounting rules, specifically by changing how it valued its biosimilar joint venture with Biogen. After the change, Samsung Biologics posted a net profit, ending four years of losses.

The upturn in the fiscal performance of the biologics business came at a key moment for Samsung, which was preparing to merge two of its units. The merger ratio, and by extension the value of the biologics group, was one of the discussion points regarding the transaction.

Samsung BioLogics strongly denied the allegations when the FSS reached its preliminary conclusion last year, going as far as threaten to sue if the probe ultimately delivered a decision “that we cannot accept​.”

The court sentenced the executives without passing judgment on whether Samsung BioLogics did or did not break accounting rules.

Samsung BioLogics has continued to win business against the backdrop of the scandal, signing a deal to manufacture Ichnos Sciences’ ISB 830 and a third agreement with UCB in recent months. Sales in the third quarter totaled KRW 184.8bn (€141m), an 83% increase over the same period of 2018.

Related topics: Markets & Regulations, Bio-Outsourcing

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