Kyobo Life asks US accounting oversight board to punish Deloitte Anjin accountants

Kyobo Life Insurance headquarters in Seoul (Kyobo Life Insurance)

South Korea’s Kyobo Life Insurance has taken its battle with Deloitte Anjin to overseas, asking a US nonprofit audit watchdog to investigate and punish three accountants suspected of inflating the prices of a put option that one of its strategic investors exercised years earlier.

One of the top life insurers here filed a complaint with the Public Company Accounting Oversight Board, requesting them to “take actions for a strong sanction” against the accountants, including the one surnamed “Lee.”

The PCAOB is a nonprofit corporation established by US Congress to oversee the audits of public companies and other issuers in order to protect the interests of investors and develop the public interest in the preparation of accurate audit reports. All PCAOB rules and standards must be approved by the US Securities and Exchange Commission. 

The overseas filing comes after the Korean Institute of Certified Public Accountants, the sole organization representing accountants here, denied Kyobo Life's multiple requests last year to punish the three accountants. KICPA refused citing difficulty in handling a complaint that is linked to an ongoing legal dispute. The PCAOB, meanwhile, has conducted inspections of one or more firms in over 50 non-US jurisdictions.

The feud between the insurer and the accounting firm dates back to 2012 when Kyobo Life Chairman Shin Chang-jae signed a shareholders’ agreement with financial investors including a consortium led by Affinity Equity Partners.

In October 2018, Affinity Equity Partners exercised the put option at a strike price of some 409,000 won ($339) as Kyobo failed to retrieve investments through an initial public offering within the promised three years.

Shin, however, claimed that the price per share was miscalculated by Deloitte Anjin -- which was in charge of determining the value of the put option -- and refused to purchase the shares.

Kyobo Life, Deloitte Anjin and Affinity Equity have been mired in a prolonged court battle since. Early last year, prosecutors indicted the three accountants from Deloitte Anjin alongside two others from Affinity Equity on charges of colluding to inflate the prices. A court ruling is expected to be made on Feb. 10.

The court battle, however, has been a major hurdle in the insurer’s IPO, which gained fresh momentum last year. In December, Kyobo Life filed for preliminary approval for IPO with the nation’s main bourse operator Korea Exchange and chose NH Investment & Securities as lead manager. The KRX, however, has been mulling on its decision, which was initially expected to be announced by mid-January, apparently concerned of the ongoing legal dispute.

Kyobo Life seeks to go public within the first half of this year to brace for tighter regulations to come with the implementation of the IFRS17, a new international accounting standard for insurance contracts, in 2023.

By Jung Min-kyung(mkjung@heraldcorp.com)