1. Overview of the case

 

1) Who did Barun Law represent? : Defendant A (former CEO of Company B, a defense contractor), who was charged with violation of the Act on Aggravated Punishment of Specified Economic Crimes (the “Economic Crimes Act”) in relation to the allegations of fraud and embezzlement and violation of the Act on Regulation and Punishment of the Concealment of Criminal Proceeds (the “Criminal Proceeds Concealment Regulation Act”)

 

2) Background of the case : Company B specializes in manufacturing and selling core motors such as servo motors and actuators in the defense and civilian industries. The transaction at issue in this case is between Company B and Company C, a defense contractor. Company B signed a contract with Company C in the mid-2000s to mass-produce motors and has been stably supplying motors to Company C as a primary supplier ever since.

 

The prosecutor charged A, the CEO of Company B, with violation of the Economic Crimes Act in relation to the allegations of fraud and embezzlement, and violation of the Criminal Proceeds Concealment Regulation Act, for embezzling approximately KRW 20.3 billion in payments for parts delivered over a period of 15 years and using approximately KRW 3.5 billion of the payments for personal use by inflating the cost of motor parts and submitting false cost data to Company C in collusion with the representatives of secondary suppliers that supplied motor parts to Company B by exploiting a loophole in the cost verification process of

 

2. Decision

Suwon District Court Decision 2022Gohap933, dated January 25, 2024

 

3. Basis of the decision

 

The court acquitted A of (1) violation of the Economic Crimes Act (for embezzlement) and (2) violation of the Criminal Proceeds Concealment Regulation Act on the grounds that there was no evidence of a crime. As for the violation of the Economic Crimes Act (for fraud), the court partially found A guilty of only about KRW 10.5 billion out of the total amount of KRW 20.3 billion in the indictment. The remaining KRW 9.8 billion was deemed not guilty on the grounds that it was difficult to establish a substantial causal relationship between A’s deceptive behavior and the amount of extortion. Accordingly, the court sentenced A to three years in prison and five years of probation.

 

4. Our argument and role

Regarding the violation of the Economic Crimes Act for embezzlement and the Criminal Proceeds Concealment Regulation Act, the prosecutor argued that Company B’s act of transferring some of the payment for motor parts received from Company C through its secondary suppliers to Company A’s account or depositing cash constituted an act of realizing the intention to profit illegally.

 

However, we carefully reviewed the evidence submitted by the prosecutor and found a number of evidence in favor of A. We carefully and specifically proved that most of the difference in the payment for the motor parts in this case was returned to the account in the name of Company B or used as operating funds for Company B. Based on this, we emphasized that the prosecution’s allegation that Defendant A had the intention to illegally obtain Company B’s funds was not proved beyond reasonable doubt. We obtained an acquittal from the court on violation of the Economic Crimes Act (for embezzlement) and violation of the Criminal Proceeds Concealment Regulation Act.

 

In addition, with respect to the violation of the Economic Crimes Act (for fraud), we argued that, in light of the lower court precedents in similar cases, the amount of extortion that is considered to have a substantial causal relationship with Defendant A’s alleged fraudulent act should be limited to the amount of the partial payment for the motor parts, not the entire payment for them. The court accepted this argument and drastically reduced the amount of Defendant A’s alleged defrauded profits from approximately KRW 20.3 billion in the indictment to approximately KRW 10.5 billion, which was the equivalent of the payment for the parts.

 

5. Significance of the judgment

The amount of extortion and embezzlement charged by the prosecution against Defendant A amounted to approximately KRW 20.3 billion and KRW 3.5 billion, respectively, and the possibility of a severe sentence could not be ruled out. However, through our aggressive defense efforts, the client obtained acquittals on two of the three counts of the indictment [i.e., violation of the Economic Crimes Act (for embezzlement) and violation of the Criminal Proceeds Concealment Regulation Act] and partial acquittals on the remaining count [i.e., violation of the Economic Crimes Act (for fraud)], resulting in a judgment of probation for Defendant A. This case was significant in that it demonstrated that a sophisticated litigation strategy based on an in-depth understanding of the defense industry and an effective defense can make a significant difference in the client’s sentence.

 

​□ Attorneys in charge: Park Sung-ho, Yoo Sang-hwa, Sim Hyun-a