2 Arrested in Samsung Bioepis Accounting Probe

May 1, 2019
The Center for Biosimilars Staff

On Monday, the Seoul Central District Prosecutor’s Office in the Republic of Korea arrested an executive and another employee at biosimilar developer Samsung Bioepis for falsifying and destroying evidence and for violating audit law.

According to the Financial Times and other sources, on Monday, the Seoul Central District Prosecutor’s Office in the Republic of Korea arrested an executive and another employee at biosimilar developer Samsung Bioepis for falsifying and destroying evidence and for violating audit law.

In November 2018, Korean regulators from the Securities and Futures Commission (SFC) said that, in 2015, Samsung BioLogics used accounting methods that allegedly misrepresented the value of the biosimilar maker prior to an initial public offering in 2016.

According to officials, Samsung BioLogics changed the way it accounted for its stake in Samsung Bioepis, a partnership with Biogen, by recognizing the partnership’s market value instead of its book value, thereby inflating its valuation.

According to Korea Biomedical Review, the arrest warrants that were executed this week are the first to be filed in the case and relate to data that may have been deleted from computers and mobile phones.

These data could be relevant, said officials, to determining whether Biogen’s contractual option to increase its share in the Samsung Bioepis partnership to 49.9% was hidden from accountants who were responsible for a merger between Cheil Industries and Samsung in 2015. Biogen announced in 2018 that it would exercise its option.

The arrests are the latest development in the probe that, last year, resulted in a $7.05 million fine, the suspension of Samsung BioLogics’ stock trading, and calls for the firing of the firm’s chief executive officer as well as the chief financial officer.

The company’s stock subsequently resumed trading in December 2018 after officials ruled that the company’s shares could remain listed while the case played out.

Then, in January of this year, a Korean court ruled that penalties against Samsung BioLogics should be suspended pending a final court determination on whether the company had indeed violated accounting standards.

For its part, Samsung BioLogics has maintained that it has not breached any accounting rules. In late 2018, the company launched an administrative lawsuit with the aim of proving the legality of its actions.