Validity of SFC's Verdict Questioned

Economists discuss the Samsung BioLogics incident during a policy forum hosted by the Citizens United for Better Society at the Korea Press Center in Seoul on Nov. 27.

The Korean financial regulator’s recent verdict on the accounting fraud allegations against Samsung BioLogics was part of the Korean government’s campaign to force the Samsung Group to reform its corporate governance, economists asserted at a seminar held on Nov. 27.

The seminar was organized by the Citizens United for Better Society, a conservative civic group, to question the wisdom of the recent ruling made by the Securities and Futures Commission (SFC) against Samsung BioLogics.

The panelists expressed concerns that the SFC’s conclusion on Samsung BioLogics’ accounting scandal would adversely affect the international creditworthiness of Korean corporations’ accounting practices based on the International Financial Reporting Standards (IFRS), which was introduced to Korea eight years ago.


Cho Dong-geun, honorary professor of economics from Myongji University, said, “The SFC concluded that Samsung BioLogics deliberately committed accounting fraud as there was a gap of 5 trillion won (US$4.42 billion) between the company’s own assessment of its value and accounting firms’ estimate. But this conclusion was illogical because Samsung BioLogics’ own appraisement was the value of its stocks after subtracting the value of call options granted to Biogen.”

Cho also noted that if Samsung BioLogics had gone public on the NASDAQ market instead of the KOSPI, the company wouldn’t have been re-audited by the financial authorities. “In the NASDAQ, when it is officially announced that there is nothing wrong with a company, the decision is respected.”


Choi Joon-sun, honorary professor of law at Sungkyunkwan University, said, “Accounting fraud is financial fraud. Who are the victims of the Samsung BioLogics’ incident? If the shareholders of Samsung BioLogics are the victims, it is a critical issue that can lead to international litigation. For instance, Elliott Management, the activist hedge fund which held a 7.12 percent stake in Samsung C&T at the time of its merger with Cheil Industries, can file a suit for compensation. As the government harasses a sound company, the country faces an outflow of national wealth.”


The panelists suspected that Samsung-bashing civic groups, financial authorities and progressive politicians sought to force the Samsung Group to reform its corporate governance in the first place through two audits on Samsung BioLogics.

Kim Jeong-dong, professor of economics from Yonsei University, said, “South Korea’s three largest accounting firms endorsed Samsung BioLogics’ change of its accounting standards for Samsung Bioepis. Samsung BioLogics had no problem with listing on the stock market, which requires a strict accounting examination. I suspect that there was a hidden political agenda behind the Samsung BioLogics’ incident.”

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