May 1, 2017

The Securities and Exchange Commission today announced that MagnaChip Semiconductor Corp. a South Korea-based semiconductor manufacturer and its former CFO Margaret Sakai have agreed to settle charges related to an accounting scheme to artificially boost revenue and manipulate the financial results reported to investors. The SEC’s order finds that MagnaChip overstated revenues for nearly two years in response to immense pressure placed on employees each quarter to meet revenue and gross margin targets that had been communicated to the public.  Then-CFO Sakai directed or approved several fraudulent accounting practices to make it falsely appear the company had met those targets.  For example, MagnaChip recognized revenue on sales of incomplete or unshipped products, and the company delayed booking obsolete or aged inventory to manipulate its reported gross margin.  MagnaChip also engaged in roundtrip transactions to manipulate accounts receivable balances, and concealed from auditors that there were side agreements with distributors to induce them to accept products early. “MagnaChip engaged in a panoply of accounting tricks to artificially meet its financial targets,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Companies that sell stock in the U.S. markets should prioritize a robust accounting culture that is entirely truthful with investors.” SEC

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