A long-running feud between Kyobo Life Insurance and a consortium led by Affinity Partners over the fair market value of Kyobo’s stock price has taken a surprising turn, with indictments issued against three accountants involved in the valuation process.

South Korean prosecutors announced after a nine-month investigation that the accountants at Deloitte Anjin had been charged with benefiting from unjust enrichment. Two officials at Affinity Partners and IMM Private Equity were also indicted for colluding with them.

The accounting firm was reported by Kyobo in April last year for allegedly violating the Certified Public Accountant Act when it valued the insurer’s shares at the request of the investor consortium. Kyobo argued that the valuation process had wrongfully overestimated the price.

The consortium, which consists of Affinity Partners, IMM Private Equity, Baring Private Equity Asia (BPEA) and GIC Private, acquired a combined 24% of the insurance company for 1.2 trillion won ($1.1 billion) in 2012. The deal included terms that allowed them to exercise a put option – meaning they could sell their stakes back to Kyobo – if the firm did not complete an initial public offering (IPO) by 2015.

The IPO was delayed past the deadline and the investors decided to exercise the put option in 2018. The share price calculated by Deloitte Anjin was 409,000 won apiece, totaling over 2 trillion won. However, Kyobo argued that it should have been set at about 200,000 won, which would bring the total amount to about 1 trillion won.

Deloitte Anjin included Orange Life Insurance in the peer group for comparison during the valuation process, and Kyobo contended that its price to book ratio of over 1.0 times was much higher than an average of 0.7 times for other insurers in the peer group, resulting in an excessively high price and an unfair market value.

Orange Life Insurance, formerly ING Life Insurance, was acquired by Shinhan Financial Group in 2018, and the insurer’s stock became more volatile during that year due to takeover talks.

Kyobo also argued that Deloitte Anjin calculated the price based on share prices in June 2018 instead of share prices at the exercise date, which was in October 2018, with the intention of inflating the price for the benefit of the investors.

Prosecutors accused Deloitte Anjin’s accountants of receiving additional compensation from the investors for doing them a favor. One official at BPEA, who lives in Hong Kong, was also under investigation but was not indicted.

“Prosecutors indicted officials at Affinity and IMM PE as well, which means they believe there are more than just technical errors in the valuation process,” said an official at one law firm in Seoul.

The investor consortium took the dispute to the International Court of Arbitration in 2019, and legal observers said the indictments will affect that process. A second hearing on the matter will be held in March, with a court ruling expected to come at the end of this year. (Reporting by Eun-sol Lee)