“Recognizing only partial accounting errors… Arbitrary evaluation of investment stocks and false reporting”
“All disposals effectively must be cancelled… Lee Jae-yong also acquitted in first trial”,
/News1 ⓒ News1 Reporter Im Se-young,
,
, ‘(Seoul=News1) Reporter Seo Han-sam = In a first-instance decision, it was ruled that the financial authorities’ sanctions against Samsung BioLogics over suspicions of intentional accounting fraud in the range of 4.5 trillion won are unfair.’,
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, ‘In a lawsuit brought by Samsung Bio against the Financial Services Commission (FSC) to “cancel corrective demands (2nd sanctions) and others,” the Seoul Administrative Court Administrative Division 3 (Chief Judge Choi Su-jin) ruled in favor of the plaintiff on the 14th.’,
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, ‘The court acknowledged that while some of the reasons for the FSC’s sanctions were valid, it deemed it appropriate to cancel all sanctions due to the reasons that were not recognized.’,
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, “The court found it difficult to agree with the FSC’s decision that ‘Samsung Bio and [affiliate] BioGen jointly control Samsung Bio Epis even though it is treated as a subsidiary in preparing consolidated financial statements for the years 2012-2014.'”,
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, ‘The court explained, “It is difficult to conclusively recognize joint control through the joint investment itself” and “it is also difficult to determine that BioGen’s call option constitutes a substantive right that should be considered in assessing control.”‘,
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, ‘However, it acknowledged that Samsung Bio improperly evaluated investment stocks at fair value by adjusting accounting for changes in controlling interests as done in the case of Samsung Epis and overstated related assets and equity.’,
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, ‘The court pointed out that Samsung Bio did not account for the loss of control based on the date of the occurrence of the fact supporting the loss of control but had predetermined to account for the loss of control after a specific date for reasons other than the loss of control (such as avoiding problems like capital erosion).’,
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, ‘The court further criticized, “Samsung Bio even went as far as fabricating supporting materials to rationalize the loss of controlling interests after pre-determining certain conclusions,” adding, “Accounting for the loss of control after setting a specific conclusion and rationalizing it afterwards constitutes an abuse of discretion.”‘,
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, ‘The court also concluded that some business reports, including periodic reports, were falsely recorded. However, even if some reasons for the sanctions were recognized, all sanctions and fines must be cancelled.’,
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, ‘The court stated, “It is difficult to maintain the sanctions as they are unless the first reason for the sanctions is acknowledged” and “each sanction constitutes an integral disposal and is inseparable from each other, as they aim at sanctions related to improper accounting.”‘,
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, ‘Earlier, the Financial Supervisory Service had concluded that deliberate accounting fraud was committed by Samsung Bio in the process of recording a profit of 1.9 trillion won in the year before its listing in 2015, despite consecutive losses since its establishment in 2011.’,
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, ‘Taking over the case, the FSC recommended the dismissal of the CFO in July 2018, designation of an auditor, and reporting to the prosecution for failing to disclose Samsung Bio’s granting of a call option (the right to buy shares at a specified value) to U.S. BioGen, a subsidiary of Samsung Bio Epis.’,
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, ‘In November of the same year, it also made subsequent sanctions, such as revising financial statements for the second time, recommending the dismissal of the CEO, and imposing a fine of 8 billion won.’,
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, ‘The change in Samsung Bio’s accounting treatment related to controlling interests in Samsung Epis in 2015 was judged as intentional accounting fraud. At that time, Samsung Bio reassessed the stake value from 290 billion won to 4.8 trillion won by converting Samsung Epis from a subsidiary to an affiliate.’,
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, ‘Samsung Bio filed separate lawsuits challenging the first and second sanctions. Regarding the first sanction, the Seoul Administrative Court in September 2020 stated that it is likely to be treated as absorbed and merged into the second sanction and sided with Samsung Bio, and the second trial is currently underway.’,
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, ‘Meanwhile, in February of last year, Chairman Lee of Samsung Bio was acquitted in the first trial in relation to the accounting fraud allegations.’