Arrest warrant sought for Samsung heir over accounting fraud

The biopharmaceutical unit of Samsung, set up in 2011, launched a joint venture, Bioepis, with the US-based Biogen in 2012.

By Author  |  Published: 4th Jun 2020  2:06 pmUpdated: 4th Jun 2020  2:07 pm
Samsung Electronics' Vice Chairman Lee Jae-yong

Seoul: South Korean prosecutors on Thursday sought an arrest warrant for Samsung Electronics’ Vice Chairman Lee Jae-yong, an heir apparent of the Samsung Group, over accounting fraud.

The Seoul Central District Prosecutors’ Office asked a Seoul court to arrest the heir of Samsung Group, the country’s biggest family-controlled conglomerate, on charges of illegal trading and market price manipulation under a capital market act and accounting fraud under an act on external audit of the corporation, reports Xinhua news agency.

The country’s financial regulator ruled in November 2018 that the biopharmaceutical unit of Samsung Group violated accounting rules, referring the case to the prosecution office for criminal investigation.

Samsung BioLogics has been suspected of committing a fraudulent accounting to help the Samsung heir inherit a management control over the entire group from his ailing father, Samsung Electronics Chairman Lee Kun-hee.

Samsung BioLogics altered the method to evaluate its affiliate, Samsung Bioepis, into the mark-to-market valuation in 2015, leading to a net profit of 1.9 trillion won ($1.6 billion) in the year after years of losses.

The biopharmaceutical unit of Samsung, set up in 2011, launched a joint venture, Bioepis, with the US-based Biogen in 2012. In 2015, Cheil Industries and Samsung C&T merged into Samsung C&T, the currently de-facto holding company of Samsung Group.

Cheil Industries, controlled by Lee at the time, inflated its valuation by overvaluing Samsung Biologics.

Lee was believed to have controlled the merged Samsung C&T, one of major shareholders of Samsung Electronics, and the family was believed to have controlled Samsung Group with a fraction of shares through cross-shareholding.

The financial market regulator estimated the fraudulent accounting at about 4.5 trillion won ($3.7 billion).