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November 15, 2018

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A bitter pill for Samsung BioLogics

The pharmaceutical arm of giant South Korean conglomerate Samsung has been fined for accounting breaches amounting to US$4 billion, and had its shares suspended indefinitely.

Contract drugmaker Samsung BioLogics is the third-biggest firm of its kind in the world by market share, and one of the South’s 10 most valuable companies.

It has a market capitalisation of 22 trillion won (US$19 billion), even after a 30 percent decline over the past month as the scandal deepened.

The firm “intentionally” violated accounting rules in 2015, a year ahead of its IPO, by inflating the value of a subsidiary, Seoul’s Financial Services Commission said.

After making losses for years, Samsung BioLogics changed the valuation method of its 85 percent stake in another group affiliate, Samsung Bioepis, raising it by 4.5 trillion won (US$3.9 billion) and resulting in net profit of 1.9 trillion won.

“Based on all evidence and all circumstances, we concluded that the firm ... deployed arbitrary accounting methods that are not in line with official accounting rules,” FSC Vice Chairman Kim Yong-beom said.

The FSC fined the firm 8 billion won and suspended trading in its shares “for a while” to give stock market authorities time to decide whether it should be delisted.

It also asked prosecutors to investigate the firm for accounting fraud and advised Samsung BioLogics to dismiss its chief executive, Kim Tae-han.

Samsung BioLogics apologized for “causing confusion” but said it was “confident” that it did not violate accounting rules, and would go to court to try to have the ruling overturned.

“We were told by many accounting specialists that our handling of accounting matters was in line with laws,” it said, describing the FSC’s conclusions as “very regrettable.”


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