Financial Authority to Speed up Review of Fraud Allegations against Samsung BioLogics

The South Korean financial authorities are likely to wrap up their review of the accounting fraud allegations against Samsung BioLogics earlier than expected.

According to the authorities, the Accounting Oversight Deliberation Committee is planning to finish its review within this month and report the result to the Securities & Future Commission (SFC), which is slated to convene on June 7. The committee held its first meeting on May 17 and the second meeting is scheduled for May 25.

At the second meeting, which is likely to be the final meeting of the committee, confrontation between the Financial Supervisory Service (FSS) and Samsung BioLogics is predicted to reach its peak. Samsung BioLogics CEO Kim Tae-han himself is going to attend it again.

Regarding the second meeting, much attention is being paid to the effect of Biogen’s announcement that it would exercise its call option on Samsung Bioepis. According to Samsung BioLogics, Biogen, a US company that has the right to acquire up to 49.9 percent of Samsung Bioepis, expressed its will to exercise the call option in a letter sent to Samsung BioLogics management on May 18, about four hours after the first meeting.

Biogen obtained the call option when it set up Samsung Bioepis with Samsung BioLogics. Samsung BioLogics has claimed that it adopted a fair value method instead of a book value approach in assessing the value of Samsung Bioepis in late 2015 in view of the fact that Biogen would exercise its call option, which it said would result in Samsung BioLogics losing full control over Samsung Bioepis.

Samsung BioLogics says Biogen’s recent announcement justifies its valuation of Samsung Biopepis in 2015. Yet the FSS still claims that it constitutes no proper grounds for the change in accounting method. It says Biogen showed no signs of exercising its call option in 2015.

In addition, controversy remains over whether the change in valuation method had to do with management right succession of Samsung Group. Some lawmakers and civic organizations argue that the valuation change was motivated to facilitate the succession of Samsung Group’s managerial control to Samsung Electronics Vice Chairman Lee Jae-yong.

Samsung Biologics denies the claim, noting that the merger ratio between Samsung C&T and Cheil Industries was set in May 2015 while the accounting method change took place in late 2015.