Court: "Securities Commission Sanction on Samsung Bio's Accounting Fraud Allegations Must Be Canceled"

The financial authorities have received a first-instance court ruling that the sanctions imposed on Samsung Biologics regarding allegations of accounting fraud should be canceled.

Seoul Administrative Court.

The Administrative Court of Seoul, Administrative Division 3 (Presiding Judge Choi Su-jin) ruled on the 14th in favor of Samsung Biologics in a lawsuit filed against the Securities and Futures Commission (SFC) under the Financial Services Commission, seeking cancellation of corrective orders and other sanctions. This ruling pertains to the second round of sanctions imposed by the SFC on Samsung Biologics.

The court stated, "While some accounting treatments are difficult to view as proper and there are grounds for sanctions, there are also grounds for sanctions that are not recognized, making a full cancellation appropriate."

Previously, the Financial Supervisory Service judged that Samsung Biologics, which had been operating at a loss since its establishment in 2011, intentionally engaged in accounting fraud during the process of recording a profit of 1.9 trillion won just before its listing in 2015. The SFC, which took over the case, decided on sanctions including recommending the dismissal of the CEO and executives, imposing a fine of 8 billion won, and corrective orders (re-preparation of financial statements), judging that Samsung Biologics' change in accounting treatment related to control over Samsung Bioepis in 2015 constituted intentional accounting fraud.

It was judged that about 4.5 trillion won worth of accounting fraud occurred, including changing Samsung Bioepis, established as a joint venture with the U.S. company Biogen in 2012, from a subsidiary to an associate company and arbitrarily changing the value of its shares from the book value (290 billion won) to the market value (4.8 trillion won).

Samsung Biologics opposed this and filed an administrative lawsuit in November 2018. They also applied for a suspension of execution to temporarily halt the effect of the sanctions. At that time, the court decided to suspend execution, stating, "It is necessary to prevent irreparable damage caused by the SFC's sanctions."

Meanwhile, regarding the allegations of accounting fraud at Samsung Biologics, Samsung Electronics Chairman Lee Jae-yong was acquitted in the first trial in February.