Seegene, the diagnostics company at the helm of South Korea’s speedy grip on COVID-19 countermeasures, was found to have cooked its books to make it look more profitable, according to the Financial Supervisory Service.

The financial watchdog suggested the firm remove a key official involved in the fiscal malpractice. Seegene will be fined, with the amount not yet decided, and assigned a special auditor for the next three years.

The official in question had already resigned at the time of the FSS notice, according to Seegene’s regulatory filing.

According to the FSS findings, Seegene had improperly amplified its performance from 2011 to the second quarter of 2019, counting bulk of products forcibly offloaded to retailers as revenue. In closer detail, Seegene had distributed more reagents and testing kits to retailers than had been ordered, through which it padded its revenue. The exaggerated revenue during the aforementioned period amounts to 70.7 billion won ($63.3 million).

The FSS said that Seegene also willfully miscategorized convertible bonds with the possibility of one-year maturity as non-current liabilities when they should clearly have been current liabilities. The timing of debt repayment is an important factor to consider for investors, and opaque handling of such information can be criminal.

Seegene had also fallen short in accounting of its research and development budget -- a chronic conundrum for pharmaceutical and biopharmaceutical companies’ bookkeeping. For seven years from 2011, Seegene had counted unfruitful laboratory spending as research and development costs, amounting to 77.1 billion won.

Seegene’s official statement regarding the FSS announcement is that the company was notified of the findings in the third quarter of 2019, whereupon it corrected the figures.

It has upheld all guidelines since, and there is nothing to further modify in the 2020 yearly business report, according to Seegene.

Seegene believes the yearslong malpractice to have stemmed from a lack of specialized personnel for the job. Since 2020, Seegene says it has recruited professionals for the task and newly created compliance and risk management teams within the company to prevent recurrences.

By Lim Jeong-yeo (kaylalim@heraldcorp.com)