Kyobo Life 'Put Option' Controversy, Financial Investors and Accountants Acquitted in First Trial

[Asia Economy Reporter Changhwan Lee] Deloitte Anjin Accounting Corporation and financial investor (FI) officials, who were indicted for applying the valuation date favorably to investors during the valuation process of Kyobo Life Insurance, were acquitted in the first trial.

The Criminal Division 22 of the Seoul Central District Court (Presiding Judge Cheolhan Yang) acquitted all Affinity Consortium officials and Anjin accountants indicted for violating the Certified Public Accountant Act at the sentencing hearing held on the 10th.

The court stated, "It is difficult to acknowledge that Anjin's certified public accountants did not exercise professional judgment during the valuation process and that the report was prepared by FI officials," and added, "It is also difficult to see that the accountants prepared false reports allowing the FIs to gain unfair financial benefits, so all three certified public accountants and the other two FI officials are acquitted."

Kyobo Life Insurance filed a complaint with the prosecution in April last year, alleging that Deloitte Anjin intentionally overvalued the fair market value (FMV) corresponding to the put option price (the right to sell at a specific price) held by its FI, the Affinity Consortium, in violation of the standards.

The Affinity Consortium signed a shareholders' agreement (SHA) with Kyobo Life Insurance's largest shareholder, Chairman Shin Chang-jae, in September 2012. The agreement stipulated that the FIs would purchase 24% of Kyobo Life Insurance shares held by Daewoo International at 245,000 KRW per share, recover their investment through an initial public offering (IPO) within three years, and exercise the put option if the IPO failed.

As the IPO was continuously delayed, the financial investors exercised the put option against Chairman Shin in October 2018 at 410,000 KRW per share.

In the complaint submitted to the prosecution, Kyobo Life Insurance claimed that although the put option exercise date was October 23, 2018, Deloitte Anjin calculated the fair market value based on June 30, 2018, intentionally overestimating the put option exercise price.

At the previous sentencing hearing, the prosecution requested prison sentences ranging from one year to one year and six months for the defendants.

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