Sanctions Against Samsung BioLogics Suspended Pending Court Ruling

A South Korean court ruled this week that penalties imposed against Samsung BioLogics, parent company of biosimilar developer Samsung Bioepis, by the Financial Services Commission (FSC) for allegedly committing fraud have been suspended.

In November, the Nikkei Asian Review reported that the FSC had found that, in 2015, Samsung BioLogics had used accounting methods that allegedly inflated the value of the company prior to an initial public offering in 2016.

The FSC imposed penalties including an estimated $7.05 million fine, suspended Samsung BioLogics’ stock trading, and called for the firing of the firm’s chief executive officer, Kim Tae-han, as well as the chief financial officer.

The company’s stock subsequently resumed trading in December 2018 after the exchange ruled that the company’s shares could remain listed while the case played out.

Upon the alleged fraud being made public, Samsung Biologics sent a letter to its shareholders apologizing for any confusion caused by the “recent accounting issue,” and went on to say that the “[Securities and Futures Commission]’s announcement is very unfortunate as it is our firm belief that Samsung BioLogics has not breached any accounting rules at all.”

In fact, the company indicated that it had sought the advice of multiple accounting firms, all of whom deemed its accounting practices acceptable. The auditors who advised Samsung BioLogics were also sanctioned by the commission by way of fines and barring the agencies from auditing Samsung BioLogics for up to 5 years.

Samsung BioLogics then filed an administrative lawsuit at the Seoul Administrative Court seeking to nullify the commission’s findings as well as calling for an injunction to stop any disciplinary action until the court rules on the case.

“The court concluded that an immediate sanction on the company could lead to irreparable damage when its violation of accounting standards has yet to be proven in court,” said an unidentified court official, according to Reuters.

The FSC has stated that it will review the details of the courts findings and plan whether to file an immediate appeal. Samsung BioLogics, for its part, has maintained its innocence. “The court’s decision is fortunate. We will do our best to prove the legitimacy of the company’s handling of accounting,” said a Samsung BioLogics official.

Samsung now awaits the outcome of the prosecutors’ investigation.