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NPS investment fund is raided in Samsung case

Sept 24,2019
Prosecutors investigating suspected window dressing by Samsung BioLogics in 2015 raided the office of the National Pension Service Investment Management on Monday to secure evidence on its possible collusion with the Samsung Group affiliate.

Prosecutors and investigators from the Seoul Central District Prosecutors’ Office searched the office of the state-run pension fund managers in Jeonju, some 240 kilometers (149 miles) south of Seoul, in connection with their ongoing probe into how and why the public fund decided in July 2015 to support the merger between Cheil Industries and Samsung C&T - and whether it was a favor for Samsung Group heir and Samsung Electronics Vice Chairman Lee Jae-yong.

Prosecutors and financial market regulators suspect that Samsung BioLogics, a contract drug manufacturer, inflated its valuation by approximately 4.5 trillion won ($3.9 billion) in 2015 after fraudulently changing the method used to calculate the value of its stake in Samsung Bioepis, a joint venture with U.S.-based Biogen Inc. After the accounting method changed, Samsung BioLogics swung to a profit.

Prosecutors suspect that the alleged window dressing was intended to enhance Lee’s control over Samsung Group by seeking to inflate Cheil Industries’ stake in Samsung BioLogics ahead of Cheil’s merger with Samsung C&T four years ago. Lee was the largest shareholder in Cheil Industries. A rise in the valuation of Samsung BioLogics benefited Lee in his efforts to overhaul Samsung Group’s governance structure.

The raid came about one month after the Supreme Court ordered a lower court in late August to reconsider its suspended jail sentenced for Lee in a bribery scandal that led to the ousting of former President Park Geun-hye, while noting that Samsung’s donation to a sports foundation was a move relevant to Lee’s management succession from his hospitalized father Lee Kun-hee.

Analysts speculate that the prosecution’s ongoing investigation may be intended to dig into suspected irregularities in Samsung Group’s succession process.

In July 2015, the National Pension Service, which held 4.8 percent of Cheil Industries and 11.21 percent of Samsung C&T, cast a vote in support of their merger after estimating the value of Cheil’s 46.3 percent stake in Samsung BioLogics at 6.6 trillion won and agreeing a merger ratio of 1:0.35 deemed favorable to Cheil.

Through the merger, Lee was able to secure the control of Samsung C&T, a de facto holding company of Samsung Group.

Yonhap