Kyobo Life charge against Deloitte Anjin over put option

Kyobo Life Insurance said Tuesday it has filed a complaint with the US Public Company Accounting Oversight Board against accounting firm Deloitte Anjin for faulty appraisal of corporate value.

It has alleged that that Deloitte Anjin, the local subsidiary of global accounting and consulting group Deloitte, wrongly assessed the fair market value of financial investors’ put options -- which could affect the management rights of current Kyobo Chairman Shin Chang-jae.

“Deloitte Anjin appears to have breached the standards in its appraisal operations when quoting our fair market value,” Kyobo said in a release, following a related filing by the Financial Supervisory Service.

“This has led to a prolonged conflict among shareholders and also brought both tangible and intangible operation damages.”

In taking the case to the PCAOB, the insurer took into account that the US tends to adopt stricter regulations for negligence by accounting firms, it added.

Back in September 2012, Kyobo chief Shin signed a shareholders’ agreement with financial investors including a consortium led by Affinity Equity Partners.

In October 2018, investors exercised their put option as stated in the deal -- to sell back their securities at a predesignated price -- as Kyobo failed to retrieve investments through an initial public offering within three years.

Shin, however, lashed back that the requested 409,912 won ($335) per share was miscalculated, taking the case to the International Chamber of Commerce.

Kyobo also pointed out that while calculating the fair market value of the controversial put option, Deloitte Anjin referred to the stock value of peer businesses from June 2017 to June 2018, instead of October 2018.

During the given period, key peer businesses such as Samsung Life Insurance logged record-high sales performances, which led to an overevaluation of Kyobo’s put option, according to Kyobo.

In a separate action, the insurer will also file a damage compensation lawsuit to a New York court against the accounting firm’s parent group Deloitte Touche Tohmatsu Limited, officials said.

The accounting firm refuted the accusations.

“Deloitte Anjin conducted the evaluation of the stock value in accordance with professional standards, as well as the service contract (in 2012),” the company said.

“We view any legal action against us as completely baseless.”

By Bae Hyun-jung (tellme@heraldcorp.com)