UPDATE : Monday, July 13, 2020
‘Samsung BioLogics destroyed evidence to hide accounting fraud for months’
  • By Jeong Sae-im
  • Published 2019.09.26 15:24
  • Updated 2019.09.26 15:24
  • comments 0

Executives of Samsung BioLogics and affiliated companies claimed that they did not engage in any window dressing, although they deleted evidence which was an obstruction of justice. They argued that such acts were not serious enough, and therefore they cannot be charged with criminal destruction of evidence.

However, prosecutors countered that their acts violated the law by tampering with evidence, regardless of whether they are guilty or not guilty in the accounting fraud case.

The Seoul Central District Court on Wednesday held the first trial on eight executives of Samsung Bioepis, Samsung BioLogics and Samsung Electronics who were indicted on charges of distorting and destroying evidence, and participating in attempts to delete evidence.

The accused admitted deleting data but claimed that such an act was not enough to be regarded as a crime of evidence destruction. They denied the prosecutors’ allegation that they engaged in window-dressing during the merger between Cheil Industries and Samsung C&T in 2015 to enhance Samsung Electronics Vice Chairman Lee Jae-yong’s control over the Samsung Group and that they destroyed data to conceal the intention.

“Prosecutors say as if all of the employees worked together to delete evidence, under the premise that we were involved in accounting fraud. However, Samsung BioLogics has not committed any fraud and has not violated accounting standards since 2012, as the prosecution claims,” the accused said. “If someone is not guilty of a criminal case, it is questionable whether a crime of evidence destruction can be valid. Even if it is, it is an important cause of consideration in the sentence.”

If criminal destruction of evidence is established based on the possibility of an investigation, the crime will depend on who is charging. Then, the scope of the crime gets too wide, the accused added.

In response, the prosecution said, “The accused seem to be too sensitive whenever they hear words such as the unfairness of the merger, window-dressing, and succession of management rights.”

The prosecution found that the crime of evidence destruction can be established regardless of whether or not the accused are guilty of accounting fraud, based on precedents. According to the Supreme Court case, a person can be charged with criminal evidence destruction if the person could predict an investigation even before an investigation.

“We cannot understand how they can claim they did nothing wrong after deleting all the data,” the prosecution said. “Wouldn't the company have to leave data to prove that it did not engage in window dressing? When we first raided the company, however, we couldn’t find any related data.”

The prosecution started the probe after the Financial Services Commission’s Securities and Futures Commission filed a complaint against Samsung BioLogics last year. In December, the prosecution raided Samsung BioLogics and suspected that the company concealed accounting materials and reports in an organized move.

The prosecution explained in detail how the executives instructed employees to destroy evidence.

According to the prosecution, the company received a notice from the Financial Supervisory Service’s response to the company’s alleged accounting fraud on May 1 last year. On May 5, Samsung Electronics held an urgent meeting at the head office in Seocho-gu, southern Seoul. The managers of Samsung subsidiaries, including Samsung BioLogics CEO Kim Tae-han, attended the meeting.

They decided to delete the data in preparation for the prosecution’s raid and ordered BioLogics and Bioepis executives to delete the related data several times. They also requested to get rid of log records so that the prosecution could not find out about the destruction of evidence.

Samsung BioLogics formatted and replaced the finance and planning team executive’s computer. The company deleted the data in the team’s shared folder in the main server, as well as log records. The company hid the backup server, the previous central server, and the last server backup under the floor of the communications room.

Showing the pictures presumably describing the scene of concealing evidence, the prosecution said, “Initially, the prosecution was never able to think that they would have torn the floor, and this floor could not be lifted by hand.” “The defendants used absorbers to hide the servers.”

The old hidden server had the data preserved. The prosecution identified approximately one million items of documents and files related to BioLogic's equity structure, call option issues, and corporate valuation. They included documents reported to Lee and Future Strategy Office from 2013 to 2017.

Samsung Bioepis also replaced the finance team's computers and mobile phones of employees in the same period. The executives searched specific keywords such as call options, JY (initial of Jae-yong), and Future Strategy Office to delete all materials containing these words. Bioepis’ executive director Yang and manager Lee entered the keywords directly from another employee's computer to check if the data was deleted and ordered more data removal.

The company used its program called QNA to make it impossible to recover data even with digital forensics. However, the prosecution found that a new worker, who had nothing to do with the case, had downloaded the files on the computer.


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