'Stock Manipulation' PHC CEO Denies Most Charges... "Will Review After Receiving Search Records"

[Asia Economy Reporter Hwang Seoyul] The CEO of a medical device company accused of stock price manipulation related to COVID-19 self-test kits denied most of the charges. During the trial, there was also a dispute over the inspection of evidence records secured by the prosecution during a search and seizure.

At around 10 a.m. on the 23rd, the Seoul Southern District Court Criminal Division 14 (Presiding Judge Jang Seonghoon) held the first trial for four defendants, including PHC CEO Choi Inhwan (49), who was indicted on charges of violating the Capital Markets Act and the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust and embezzlement). CEO Choi and two other executives, as well as the representative of a PHC affiliate, denied most of the charges. However, Kim (36), who was indicted for evidence destruction, admitted to the charges.

CEO Choi and others stated, "It cannot be seen that a series of acts were planned from the beginning with the intention of obtaining illegal gains, and the image of a no-capital M&A corporate raider is incorrect," and denied the charges, saying, "There was no distribution of false materials or false disclosures to boost the stock price." Regarding the charges of obstruction of business and obstruction of official duties by deception, they expressed that it is difficult to provide comprehensive opinions due to only having one week to review the evidence records but denied the charges in principle.

The representative of the PHC affiliate also denied the embezzlement and breach of trust charges and expressed an intention to deny the charge of obstructing the audit but said they would provide more detailed statements after reviewing the evidence records.

During the trial, there was a conflict over whether the defendants could access electronic evidence obtained by the prosecution during the search and seizure. CEO Choi’s side said, "A significant portion related to the search warrant was denied by the prosecution," and added, "It is incomprehensible to refuse access on the grounds of an ongoing co-conspirator investigation." The prosecution responded, "We carefully reviewed the parts requested by the defense counsel and made a decision," and said, "It is unlikely that the conclusion will change, so it would not be bad to leave the judgment to the presiding judge."

Choi and his group are accused of manipulating the stock price by falsely promoting PHC, which they acquired with no capital, as the first in Korea to obtain FDA approval for producing and exporting COVID-19 specimen transport media. They allegedly embezzled approximately 80.9 billion KRW in illicit profits by diverting funds and profits meant for PHC and its affiliates. PHC’s stock price rose from a closing price of 775 KRW in March 2020 to 9,140 KRW in September 2020, a 1,079% increase in six months.

According to the prosecution, they manipulated clinical trial results and doctor’s signatures for COVID-19 diagnostic kits and specimen transport media to obtain sales approval or register as sales companies by submitting the falsified data to the Ministry of Food and Drug Safety and the FDA, demonstrating bold criminal methods.

They are also accused of embezzling 13.2 billion KRW from affiliate A, another KOSDAQ-listed company, to maintain PHC’s listing. PHC and affiliate A were suspended from trading last March due to a refusal of audit opinions, causing a risk of approximately 269.6 billion KRW in losses to minority shareholders.

There is also a charge of destroying evidence during the investigation. According to the prosecution, Choi and his group submitted forged emails, pretending to be from the FDA’s U.S. agent, as evidence during the Financial Services Commission’s Capital Market Investigation Team and prosecution investigations. Under CEO Choi’s direction, they deleted evidence emails during the execution of the search warrant, obstructing the investigations by the Financial Services Commission and prosecution.

The next trial date is scheduled for 4 p.m. on the 13th of next month.