[Editorial] Special investigation of Samsung C&T in relation to Samsung BioLogics accounting fraud unavoidable

amsung BioLogics is currently under fire for accounting fraud.

Samsung C&T, a key part of the Samsung Group, is deeply enmeshed in the scandal over deliberate accounting fraud at Samsung BioLogics. Beyond its mere status as Samsung Bio’s parent company, evidence has emerged to suggest that it actually directed the process. This explains why many are discussing the need for a Financial Supervisory Service (FSS) special accounting suitability judgment on Samsung C&T.

According to a Samsung Bio internal accounting team document reported on by the Hankyoreh, Samsung C&T set up a task force to discuss ideas for account handling with the Samsung Bio accounting team and direct the fraudulent accounting process. One example occurred with a visit to the Samsung Bio head office in Incheon’s Songdo neighborhood on Aug. 5, 2015, for an interview with the accounting firm Anjin for an “assessment of BioLogics’s suitable corporate value in the event of a merger,” where countermeasures were discussed “to ensure suitability in the merger percentages and prevent market effects such as falling stock prices.”

This took place just prior to a merger between Cheil Industries and Samsung C&T.

Before the Cheil Industries/Samsung C&T merger, Samsung Electronics Vice Chairman Lee Jae-yong was Cheil Industries’s majority shareholder with a 23% stake, while Cheil Industries was Samsung Bio’s majority shareholder with a 46% stake.

Based on this situation and the content and circumstances of the Samsung Bio internal document, past speculation that Samsung Bio’s stock value as an affiliate was improperly inflated to help push through a merger benefiting Lee seems to be increasingly borne out in hard facts. This is something that will need to be brought fully to light through investigations by financial authorities and prosecutors.

The People’s Solidarity for Participatory Democracy (PSPD), the group that first made the allegations of fraudulent accounting at Samsung Bio, said it plans to immediately request that the FSS conduct a special adjudication on Samsung C&T. Those procedures appear more or less unavoidable in view of FSS regulations stating that a special judgment may be considered when reports of accounting violations by a specific company are submitted under an individual’s real name, along with the internal document supporting the allegations.

The decision handed down by the Financial Services Commission’s Securities and Futures Committee on Nov. 14 affirmed only the “truth” of deliberate accounting fraud at Samsung Bio, without specifying anything about the “intentions.” If the Samsung Bio accounting fraud is the tip of the iceberg, then the “intentions” aspect represents the iceberg itself: the Cheil Industries/Samsung C&T merger and the management succession of Vice President Lee Jae-yong.

That is why the FSS judgment and prosecutors’ investigation are so important. The only way to quiet the speculation is to bring the entirety of the accounting shenanigans and merger process to light via investigations by financial authorities and prosecutors. Accounting improprieties are a zero-sum game: gains for one party inevitably translate into losses for others. It’s another reason the whole truth of this misbehavior needs to be brought to light.

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