EXCLUSIVE: The giant Samsung Electronics Corporation has called in a hit squad of 13 Korean auditors to investigate their Australian operation. The swoop, which took local management by surprise, was ordered after the Korean company was tipped off by a former senior executive who made allegations of massive irregularities in the sale of Samsung seconds.
It is believed that extensive documents were supplied to the Korean auditors.
Things started to unravel at Samsung Electronics Australia when the Korean auditors started to ask questions of existing management about irregularities in the disposal of products labelled seconds to Korean linked companies based in Australia that primarily dealt with senior Korean management at Samsung Australia.
According to ChannelNews sources, the auditors have now moved to interviewing former Samsung staff after current staff refused to comment believing that their jobs “may be on the line” if they commented on what they know.
They are also probing transactions going back more than 10 years to when Samsung was a small Korean company selling CRT TVs, monitors and appliances.
Being probed is the relationship between SEA executives and two companies, QQ Discounts in NSW and a Korean owned company which trades as the Samsung Concept Store at Burswood. The store is owned by World Digital Arcade Pty Ltd. Both operations appear to have exclusive relationships to buy goods labelled as seconds from Samsung Electronics Australia. At this stage ChannelNews has no evidence that QQ Discounts or the Samsung Concept Store, which is not owned by Samsung Australia have done anything wrong.
Among former staff that are set to be interviewed by the audit team are Mark Beard, former Sales Director at Samsung Australia, Norman Kriek, Former head of IT sales and Marketing, Mark Leathan, former Marketing Manager of Consumer Electronic Products, Alan McDonald and several former employees who are now working for Samsung competitors.
One former executive who now works for a Japanese Consumer Electronics company is believed to have questioned the relationship between Samsung Australia, Korean Executives and several Korean companies who traded with Samsung Australia as far back as 1999.
“At this stage Samsung Australia was small but despite Samsung’s then size, relationships had already been established for the trading of second hand goods between Korean management and several Korean owned companies in Australia.” said one former executive.
In their latest filings with the Australian Companies and Securities Commission, the directors of Samsung Electronics Australia are listed as KY Choi, SU Han, SR Yoon. Choi is shown as resigning on the 10th of August 2009. There is no evidence that any of these executives have committed any offences or are involved in any illegal transactions.
The financial results up to December 2009 reveal that Samsung grew revenues from $1.29 Billion to $1.68 Billion in 2009. Profits were $24.21 Million at December 2009.
The Australian auditors of the company are Price Waterhouse Coopers.
According to Samsung sources one area of interest is the Samsung Finance department, who along with other Samsung management were responsible for setting the price that second hand Samsung goods were sold for in Australia. They also determined who could buy the goods.
A former senior Samsung Executive said last night “At last information is coming out. This is not an issue about brown paper bags of money, we are talking about sacks full,” they said.
“Whenever we raised issues internally in the company regarding seconds, we were told to leave it alone. I know of several occasions when management question the margins being given to Korean linked companies, the people who made the decisions on this were known in the company as the Korean Mafia and we knew not to interfere with this process”.
Another former executive said: “Something was always not right about this area of the business. Several people in the company were aware of issues associated with Samsung seconds but you were always told the same thing, butt out,” they said.
According to insiders, a former executive who left Samsung last year wrote to Samsung Management in Korea earlier this year. The matter was taken so seriously it resulted in 13 auditors being despatched to Australia to trawl through the local finances of Samsung Australia. High on the auditors’ agenda will be the prices that were set for the goods sold to several Korean linked companies.
They are also set to investigate whether local management followed Samsung corporate procedures involving the distribution of goods returned from retailers or goods that were being classified as “seconds”.
According to the Australian Companies and Securities Commission database, there is no registration for a business trading in NSW as The Samsung Concept Store. However there is a listing for World Digital Arcade Pty Ltd who have a small reference on the bottom of the stores’ web site which operates under the domain worlddigital.com.au. The contact for this site is email@example.com an employee of Samsung Australia.
Samsung Australia management have chosen not to comment on this other than to confirm that an investigation is taking place involving several auditors from Korea. Both QQ Discount and management from World Digital Arcade were not available to comment.