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2 Samsung Electronics execs attend arrest warrant hearing in biotech accounting scandal

All News 10:12 June 04, 2019

SEOUL, June 4 (Yonhap) -- Two Samsung Electronics executives charged with ordering the destruction of evidence about suspected accounting fraud at the company's biotech affiliates are to attend an arrest warrant hearing at a Seoul court on Tuesday.

A Samsung Electronics senior executive vice president surnamed Ahn, who is in charge of business support operations, and another senior executive vice president in charge of finance, who is identified only as Lee, are to undergo lengthy questioning by Judge Myeong Jae-kwon of the Seoul Central District Court, who will review the legitimacy of their pre-trial detention.

Ahn and Lee are accused of deciding at a company meeting on May 5, 2018, to manipulate and destroy accounting data and internal documents of contract drug manufacturer Samsung BioLogic and its affiliate, Samsung Bioepis, which were both implicated in an accounting scandal.

2 Samsung Electronics execs attend arrest warrant hearing in biotech accounting scandal - 1

Prosecutors have suspected that window dressing was committed in 2015 to inflate the valuation of Samsung BioLogics ahead of its initial public offering in 2016.

The nation's financial watchdog earlier estimated in its own inquiry that the alleged fraudulent accounting by Samsung BioLogics amounts to approximately 4.5 trillion won (US$3.9 billion). The then-loss making Samsung BioLogics reported sudden profits in 2015 after it changed the method used to calculate the valuation of its stake in Samsung Bioepis, a joint venture with U.S.-based Biogen Inc.

Prosecutors said Ahn and Lee convened the May 5 meeting after the Financial Supervisory Service notified Samsung BioLogics and Samsung Bioepis of their suspected window dressing.

The two Samsung executives are suspected of having since masterminded the entire process of evidence destruction and manipulation at the two biotech companies.

Samsung Electronics is believed to be functioning as a control tower for other Samsung Group companies.

In May, two other senior executive vice presidents of Samsung Electronics and two lower-ranking executives of the company, who hold the title of senior vice president, were arrested on the same charges.

In addition, a Samsung Bioepis executive was arrested and indicted last month for ordering his subordinates to delete about 2,100 computer files, including those containing words and initials referring to Samsung Electronics Vice Chairman Lee Jae-yong.

Prosecutors also requested an arrest warrant for Samsung BioLogics CEO Kim Tae-han in late May but the Seoul court rejected it.

Prosecution investigators found a computer server and tens of notebooks concealed under the floor of Samsung BioLogics plant in Incheon, west of Seoul, in a recent raid.

Prosecutors are expected to summon Chung Hyun-ho, president of Samsung Electronics, if the court approves arrest warrants for Ahn and Lee. Chung is known as one of the closest aides for Lee Jae-yong.

Civic groups claimed the alleged window dressing was intended to enhance Lee Jae-yong's control of Samsung Group by seeking to inflate Cheil Industries Inc.'s stake in Samsung BioLogics ahead of Cheil's merger with Samsung C&T Corp. in 2015. Lee was the largest shareholder in Cheil Industries. It means a rise in the valuation of Samsung BioLogics has benefited Lee in his efforts to overhaul Samsung Group's governance structure.

Samsung BioLogics has claimed that the change of accounting methods and the revaluation of Samsung Bioepis in 2015 were in line with international accounting standards.

Lee, the de facto leader of the conglomerate, was released from prison in February last year after being locked up for nearly a year on charges of providing bribes to ousted President Park Geun-hye's confidante.


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