Samsung Biologics Administrative Lawsuit Also Accelerates After 2 Years Following Lee Jae-yong Indictment

Securities and Futures Commission refuses to submit documents citing 'investigation impact on succession suspicion'
With justification gone, submission likely before next hearing date

Lee Jae-yong, Vice Chairman of Samsung Electronics / Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Seongpil Cho] Following the prosecution's decision to indict Samsung Electronics Vice Chairman Lee Jae-yong, the lawsuit filed by Samsung Biologics against the Securities and Futures Commission (SFC) demanding corrective measures is expected to gain momentum. The lawsuit has been stagnant for nearly two years since it was filed in court in November 2018.

According to the legal community on the 2nd, the administrative lawsuit filed by Samsung Biologics against the SFC, requesting a judgment on whether the accounting treatment was illegal, is currently being heard by the Administrative Division 3 of the Seoul Administrative Court (Presiding Judge Hwanwoo Yoo). After the first hearing in January this year, four hearings were held until June, but the trial could not proceed in earnest due to issues related to document disclosure.

At the first hearing, the court ordered the SFC to submit audit materials related to Samsung Biologics and Samsung Bioepis. The court wanted to understand what views the SFC held regarding accounting standards and what corrective actions were requested of Samsung Biologics. However, the SFC did not comply with the order to submit documents, opting instead to file a retrial. The SFC argued that the documents could affect the prosecution's investigation into suspicions of Samsung's merger and succession and therefore could not be disclosed before the indictment. In this situation, with the prosecution concluding its 1 year and 9 months investigation into illegal succession of Samsung's management rights, the SFC no longer has grounds to withhold document submission.

The photo shows Samsung Biologics in Yeonsu-gu, Incheon [Image source=Yonhap News]

Samsung Biologics' lawsuit to cancel the sanctions is a branch of the case concerning suspicions of Samsung's merger and succession. The prosecution believes that during the 2015 merger between Samsung C&T and Cheil Industries, accounting fraud was systematically planned and carried out to facilitate Vice Chairman Lee's succession of management rights. The prosecution views the accounting fraud amounting to 4.5 trillion won at Samsung Biologics as a preparatory step to inflate the value of the parent company Cheil Industries to assist Vice Chairman Lee during the merger. Samsung Biologics' lawsuit to cancel the sanctions stems from this issue.

The SFC regarded the recognition of 4.5 trillion won in valuation gains as a violation of accounting standards and imposed sanctions including recommending the dismissal of Samsung Biologics' CEO and responsible executives, appointing an auditor for three years, corrective orders, and a fine of 8 billion won. Samsung Biologics filed a lawsuit to cancel these sanctions, arguing that there was no illegality in the accounting treatment and that the SFC's sanctions were unjust.

As of the morning of this day, the SFC has not complied with the court's order to submit documents but is expected to submit them before the next hearing on October 14. Meanwhile, there is a possibility that the retrial case currently under review by the Supreme Court may be dismissed. However, since the order to submit documents is not compulsory, the Supreme Court's decision is unlikely to significantly affect this process.

This content was produced with the assistance of AI translation services.