(Photo= Yonhap news)

 

[Alpha Biz= Reporter Kim Jisun] The Financial Supervisory Service (FSS) is considering whether to appeal the recent ruling on Samsung Biologics' accounting fraud case. The court's decision in the first trial ruled that the financial authority's sanctions should be revoked.

On the 15th, financial industry sources revealed that the FSS stated, "Once we receive the full text of the ruling, we will thoroughly analyze the details, including whether the accounting standards were violated," adding that they plan to provide their opinion on whether to appeal to the Financial Services Commission (FSC).

The Seoul Administrative Court's Administrative Division 3, led by Chief Judge Choi Soo-jin, ruled in favor of Samsung Biologics in the lawsuit the company filed against the Securities and Futures Commission (SFC), which operates under the FSC, seeking to cancel corrective orders. The court sided with Samsung Biologics.

In 2015, Samsung Biologics reclassified Samsung Bioepis from a subsidiary to an affiliate, significantly increasing its stake value from KRW 290 billion to KRW 4.8 trillion. Industry speculation suggested that this move was a fraudulent accounting maneuver aimed at facilitating the succession of Lee Jae-yong, then Vice Chairman of Samsung Electronics.

In 2018, the SFC concluded that the change in accounting treatment regarding control over Samsung Bioepis constituted clear accounting fraud. Consequently, the SFC imposed sanctions, including the dismissal of Samsung Biologics' CEO and a fine of KRW 8 billion.

This ruling appears to be a follow-up to the first-instance criminal trial in February, which ended in favor of Chairman Lee Jae-yong. The criminal court ruled that the change in control over Samsung Bioepis in 2015 was justified due to the increased likelihood of the company's business success, making Biogen’s call option a substantial right.

However, the FSS emphasized that "although the SFC lost the entire case, the court acknowledged that there were no procedural defects in the sanctions, and unlike the criminal court, it ruled that the 2015 change in control was not a normal accounting treatment." The FSS noted that the ruling deemed the change a mere tool to avoid capital erosion, indicating it was not a legitimate accounting practice.

 

 

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