Samsung execs face jail for destroying evidence in Biogen JV fraud probe

Is it possible to commit a human rights violation simply by not asking the right questions?
Three Samsung executives faces jail time for destroying evidence related to a criminal probe of potential accounting fraud at CDMO affiliate Samsung BioLogics. (Getty Images/AndreyPopov)

Samsung BioLogics has fought accusations that it inflated the value of its Biogen biosimilar joint venture Samsung Bioepis, breaking accounting rules in the process.

Counter to that defense? The fact that several executives destroyed and hid evidence. And now, three of those execs could face jail time.

A Seoul court on Monday handed out jail terms of up to two years to three Samsung Electronics executives for their roles in destroying data and documents at Samsung BioLogics, according to Yonhap.

“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, as quoted by the South Korean news agency. “The methods for concealment, which are difficult for an average person to imagine, also shocked society.”

The case sprung from a raid that prosecutors performed last year at a Samsung BioLogics plant, where agents found computer servers and several notebooks—which they believe are related to the alleged accounting fraud—concealed under the floor.

Samsung Electronics held a meeting last May after receiving a notice from South Korean securities watchdog for alleged accounting fraud. It was at that meeting, attended by top Samsung execs including Samsung BioLogics CEO Kim Tae-han, that decisions were made to delete data to prepare for a possible raid, prosecutors said, according to an earlier Korea Biomedical Review report.

The scheme involved replacing the finance team’s computers, deleting log files and hiding a backup server, according to the prosecutors. The implicated employees admitted to destroying evidence but argued they didn’t break criminal laws because the fraud case itself is still up in the air, according to the publication.

RELATED: More trouble for Samsung BioLogics: Prosecutors raid Korea Exchange in IPO probe

Korea’s financial regulators at the Securities and Futures Commission have argued that Samsung BioLogics inflated the value of its Biogen-partnered JV Samsung Bioepis by $3.9 billion before an initial public offering in 2016.

Despite years of losses, the Samsung CDMO had suddenly swung to a 1.9 trillion won ($1.6 billion) profit in 2015. That quick turn came after the company changed the accounting method for calculating the JV's value. While the SFC deems the practice unlawful, the Samsung unit has said it followed related guidelines.

Critics suspected the change was made to help enhance embattled Samsung heir Lee Jae-young’s control over the group, according to Yonhap. Lee himself faces charges of bribing former South Korea President Park Geun-hye.

Meanwhile, Biogen has deepened its ties with the Korean firm, having recently gained exclusive rights to two more biosimilars made by the JV—knockoff versions of Roche and Novartis’ Lucentis and Regeneron and Bayer’s Eylea, both approved to treat wet age-related macular degeneration. It has also expanded marketing deals on three existing TNF inhibitor copycats to China.

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