[THE INVESTOR] Samsung BioLogics CEO Kim Tae-han attended the second round of meeting with financial authorities on May 25 to make another attempt to allay suspicions of exaggerating the value of its affiliate to shore up its balance sheet and show profits in 2015.

In the court-like meeting, regulator Financial Supervisory Services presented the accounting fraud case with evidence it collected while conducting a yearlong audit on Samsung BioLogics, while the company offered a point-by-point rebuttal. 

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This is the second gathering to review the tentative audit findings of the FSS, which gave a preliminary notice earlier this month to Samsung BioLogics that it breached accounting rules while keeping books in 2015, just before its KOSPI listing the following year. It also notified the firm of potential measures against the suspected wrongdoings.

The full details of the review session will remain confidential until a final decision will be announced by the top financial regulator Financial Services Commission on June 7.

“We will conduct the meeting in an efficient manner by discussing the matter based on professional judgement as we have heard their opinions in the first session last week,” said Kim Hak-soo, head of the review session.

The main agenda on the table is whether Samsung BioLogics had committed accounting irregularities in the process of posting net profit after logging four straight years of deficits by switching to valuing Samsung Bioepis, its joint venture with US Biogen, at fair market value instead of book value. The valuation of Samsung Bioepis skyrocketed to 4.8 trillion won (US$4.45 billion) from 290 billion won in the process.

Samsung BioLogics has claimed that the revaluation was possible and legitimate as it had started to categorize Samsung Bioepis as an affiliate, not a subsidiary, citing possibility that its US partner Biogen will exercise its call option to increase stake in Samsung Bioepis to 50 percent minus one share.

Critics believe shifting its accounting method led to a drastic boost in its balance sheet that was used for preliminary review of the firm’s stock debut, saying there wasn’t convincing evidence that Biogen was willing to up stake in Samsung Bioepis at that time.

To cement its claims, Samsung BioLogics said on May 18 that Biogen has confirmed that it will increase its stake in Samsung Bioepis up to nearly 50 percent by end-June.

Meanwhile, it is not clear whether another session between the Samsung unit and local authorities will be convened in the near future. Industry sources are divided, with some saying that another meeting is in the offing, while others say this may have been the final session.

By Park Han-na (hnpark@heraldcorp.com)