Regulator recommends Samsung BioLogics axe CEO over accounting controversy
The South Korean financial regulator, the Securities and Futures Commission (SFC), decided that Samsung BioLogics had changed the accounting treatment of its stake in Samsung Bioepis from book value to fair market value in 2015.
This action came prior to its initial public offering (IPO) in 2016, and changed how it valued the Samsung Bioepis business prior to merging – leading to the parent company posting a $1.8bn (€1.5bn) net profit, after the experiencing losses in the four years prior.
The SFC offering its final ruling this week, recommending the dismissal of the contract development and manufacturing organisation’s CEO, alongside a fine of KRW 8bn ($7.1m) and has referred the case to prosecutors.
In addition, the Korea Exchange has suspended trading of Samsung BioLogics’ stocks while it determines whether the company can remain listed.
The on-going case has led the firm’s share price to tumble: shares fell from a high of KRW 546,000 in September of this year to KRW 334,500 before trading ceased.
In response to the findings, the company released a statement: “In 2016, not only did the due diligence from the Korean Institute of Certified Public Accountants (KICPA) conclude that there were no problems in the accounting treatment, but we also received an official response from the Financial Supervisory Service (FSS) and opinions from multiple accounting firms that the accounting treatment was indeed done correctly.”
The firm went on to say that it would file an administrative lawsuit “to prove the legality of Samsung BioLogics’ actions.”
Samsung BioLogics was not the only company in the firing line from the SFC; Samjong KPMG was hit with a fine of KRW 170m and will not be able to audit the firm for five years, while fellow auditor, Deloitte Anjin, will also be unable to work with Samsung BioLogics for the next three years.
The news arrives not long after parent company, Samsung, announced that it was looking to invest into both Samsung BioLogics and Samsung Bioepis due to their growth potential. Internally, the CDMO recently started production at its third plant, created at a cost of $740m (€639m), and mooted expansion plans at a recent industry event.
