The stock trading suspension of Osstem Implant, the world's largest seller of dental implants in sales volume, continued for the third day after a staff allegedly embezzled corporate funds almost equal to its equity capital.
The incident attracted the public's keen attention, marking the single largest embezzlement case among Korea’s listed firms.
According to a public notice posted by Osstem, the company sued the employee responsible for managing the company’s fund, surnamed Lee, for embezzling 188 billion won ($157.7 million) on Dec. 31. The amount is equivalent to 91.81 percent of its equity capital of 204.76 billion won.
Lee is suspected of spending a huge portion of the embezzled funds to purchase the shares of Dongjin Semichem, specializing in electronic materials and foaming agents, in October last year.
The Korea Exchange (KRX) has suspended Osstem stocks, noting that the company is subject to a listing eligibility review. If the embezzlement accounts for 5 percent or more of a company’s equity capital, the KRX suspends its stock trading and decides whether to include it in the delisting review.
Osstem said it would take all necessary measures to retrieve the embezzled money, stressing that the employee's account had been frozen,
On Wednesday, CEO Um Tae-kwon also vowed to recover most of the stolen money in his apology letter.
"We deeply regret this accident," Um said. "We will do our best to accelerate the resumption of stock trading by working out ways to prevent the recurrence of similar accidents and a firm management improvement plan."
According to market watchers, despite the company's pledge to resume stock trade, the current limbo could continue for more than a year.
The KRX will decide whether Osstem Implant falls under the substantive examination for listing eligibility by Jan. 24, or within 15 business days, excluding the day the reason for the substantive examination of listing eligibility occurred. In addition, the exchange will receive data related to company sales, finance, internal control, and management transparency from Osstem Implant and decide whether to make it subject to deliberation.
During the substantive examination for eligibility, a key factor is how much money the company can retrieve. However, the police have yet to arrest the employee, meaning that it will be difficult to confirm the amount of recoverable funds until the employee’s arrest and prolonged trade suspension, they said.
An investment expert also said there is a high possibility that Osstem Implant would fall under the examination for listing eligibility, citing that the company’s loss of 92 percent of its equity capital demonstrated a huge flaw in its internal control.
"If KRX designates Osstem Implant for substantive examination, the company must submit an improvement plan within 15 business days, and the exchange holds a corporate review committee that decides on continuous listing or delisting, and grants improvement period within 20 trading days," Lee Jun-soo, an analyst for Prophet Asset Management, told Korea Biomedical Review. "As the exchange normally gives an improvement period of six months to a year, there is a possibility that the trade for Osstem Implant will be suspended for more than a year."
Meanwhile, the police have taken emergency measures to ban the Osstem Implant employee suspected of embezzlement from leaving the country, believing Lee is still in Korea and looking for his whereabouts.
Authorities are also investigating the possibility that another employee may have colluded with him, judging that it would have been difficult for Lee to commit such a high crime by himself.
The police plan to intensively investigate the possibility that other employees may have condoned or actively participated in sharing financial profits.