The financial regulator said Thursday it has concluded that a 2015 accounting breach by Samsung BioLogics Co. was intentional and the biopharmaceutical company clearly violated accounting rules.
The ruling by the Financial Services Commission (FSC) is expected to deal a serious blow to Samsung BioLogics, which has strongly denied allegations of accounting breach.
|Kim Yong-beom, vice chairman of the FSC, speaks during a press conference on Samsung BioLogics on July 12, 2018. (Yonhap)Kim Yong-beom, vice chairman of the FSC, speaks during a press conference on Samsung BioLogics on July 12, 2018. (Yonhap)|
In May, financial authorities gave a preliminary notice to Samsung BioLogics that it broke accounting rules in 2015.
The regulatory probe centers on questions about the biopharmaceutical company's sudden profits in 2015 after years of losses. Samsung BioLogics reported a net profit of 1.9 trillion won (US$1.72 billion) that year after changing the method used to calculate the value of its affiliate, Samsung Bioepis.
Samsung BioLogics has claimed that the change was in line with international accounting standards.
Kim Yong-beom, vice chairman of the FSC, told reporters that Samsung BioLogics violated accounting rules by failing to make a public disclosure on a proposal by U.S. partner Biogen to boost its stake in the joint venture. The proposal prompted Samsung BioLogics to change the method of valuation.
Samsung BioLogics was aware that the failure would have violated accounting rules at that time, but the company intentionally failed to make a public disclosure, Kim said.
After holding a series of review sessions on punitive measures against Samsung BioLogics, the FSC asked the company to sack executives who were involved in the accounting breach and decided to refer the case to prosecutors for further investigation.
Trading of Samsung BioLogics shares could be suspended if the case is referred to prosecutors.
However, shares of Samsung BioLogics are likely to avoid being suspended because the accounting breach was related to the company's failure to make a public disclosure about Samsung Bioepis, FSC officials said.
The FSC also ordered one of the auditors for Samsung Biologics, Samjong KPMG, to stop auditing the company for four years.
The ruling came shortly after the stock market closed. Shares of Samsung BioLogics plunged 9.91 percent to 386,500 won in after-hours trading.
The Korea Exchange said it has since halted trading of Samsung BioLogics shares until 9 a.m. Friday.
Samsung BioLogics expressed regrets over the FSC's ruling, claiming that it had no "motive" to have intentionally violated accounting rules.
Samsung BioLogics said it will consider taking legal actions against the ruling. (Yonhap)
Kim Cheol-hoon firstname.lastname@example.org