(LEAD) Court gives jail terms to Samsung execs in accounting fraud case

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SEOUL, Dec. 9 (Yonhap) -- A Seoul court on Monday handed jail terms of up to two years to Samsung Electronics Co. executives for destroying evidence in relation to an alleged accounting fraud at Samsung BioLogics Co.

A Samsung Electronics vice president overseeing the company's funds was sentenced to two years in prison, while two presidents in a Samsung Electronics task force were each sentenced to one year and six months in prison, according to the ruling handed down by the Seoul Central District Court.

The executives were charged with ordering other employees to tamper with internal documents and actually taking part in the process since May last year, when probes into the accounting fraud allegations were imminent.

"Destroying and hiding evidence in a group-wide move regarding the accounting fraud case that was an issue the public took interest in is not a light crime," the court said. "The methods for concealment, which are difficult for an average person to imagine, also shocked society."

The court went on to stress that the country's biggest conglomerate should have acted in a transparent and fair manner.

"Most people (of South Korea) want to see Samsung, which has become a global company, to become the world's best company and contribute to the national economy. However, that growth will only be encouraged if it is done fairly according to law and procedure. If it is growth backed by foul play and cheating, it will not be endorsed."

Monday's ruling, the first regarding the wider accounting fraud case, only dealt with the executives' evidence tampering. Prosecutors are still probing the accounting fraud allegations.

Prosecutors had earlier demanded jail terms of up to four years for the indicted executives, citing the gravity of their charges.

They had demanded a four-year prison sentence for the vice president in charge of funds and 3 1/2-year terms for vice presidents in other units.

Prosecutors and financial market regulators suspect that Samsung BioLogics, a contract drug manufacturer, inflated its valuation by approximately 4.5 trillion won (US$3.78 billion) in 2015 after fraudulently changing the method used to calculate the value of its stake in Samsung Bioepis, a joint venture with U.S.-based Biogen Inc. After the accounting method changed, Samsung BioLogics swung to a profit.

Prosecutors suspect the alleged window dressing may have served to benefit a 2015 merger between two Samsung units and thereby enhance Samsung heir Lee Jae-young's control at the group.

The alleged fraud could have inflated the value of Cheil Industries Inc.'s stake in Samsung BioLogics, ahead of its merger with Samsung C&T Corp., according to civic groups. Lee was a major stakeholder in Cheil at that time.

mlee@yna.co.kr
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