The defendant A decided to carry out a local housing association project, established a local housing association promotion committee, and was appointed as the chairman of the promotion committee (later appointed as the head of the local housing association). Meanwhile, he entered into a service contract between a separate legal entity he operated and the local housing association promotion committee (later succeeded by the local housing association), performed land work for the local housing association project, and received a total of KRW 3.66 billion for land work from the local housing association. The defendant B was the vice president of the local housing association and succeeded the defendant A as the president of the association. The defendant C, as a representative of a business agency, entered into a business agency contract with the local housing association regarding the local housing association project and acted on its behalf.

(1) The prosecution alleged that although neither the defendant A nor the entity operated by him actually performed any land work, the defendant A could have performed land work as the chairman of the promotion committee and the president of the association, and there was no business need to hire a separate entity and to pay the fees for land work to the entity, the defendants conspired to cause the entity operated by the defendant A to be paid the excessive amount of KRW 3.66 billion, thereby assisting the defendant A to obtain financial profits and causing property damage to the local housing association. (2) The prosecution also accused the defendants A and B of breaching their duty by causing KRW 150 million to be paid to the entity operated by the defendant A for land work. The prosecution charged the defendants with violation of the Act on Aggravated Punishment of Certain Economic Crimes (breach of duty), and requested the court to sentence seven years and three years in prison against the defendants A and B, respectively.

We explained in detail the nature of the local housing association project and the necessity of securing land for the local housing association project. Meanwhile, we elaborated on the following points:

(i) In order to proceed with the local housing association project, it was essential for the local housing association to enter into a land work service contract between the local housing association and the entity operated by the defendant A, and it can be seen that the entity operated by the defendant A actually performed all the land work;

(ii) The fact that the defendant A was the chairman of the local housing association and the president of the association does not prohibit the entity operated by the defendant A from entering into a service contract with the local housing association;

(iii) In light of the payment of fees for land work for other local housing association projects, the land work fee in this case cannot be considered excessive;

(iv) In addition, there is no evidence that the defendants A and B violated their professional duties in the course of operating the association, nor did they cause the entity operated by the defendant A to acquire unjustified financial profits or cause property damage to the local housing association, but rather the local housing association benefited substantially from the successful execution of the project.

The court largely accepted our arguments, finding that (1) it is difficult to prove beyond reasonable doubt that the defendants A and B breached their duties to the detriment of the local housing association by entering into a land work contract between the local housing association and the legal entity operated by the defendant A, and paying the entity operated by the defendant for services under the contract, and that there is no evidence to prove otherwise. Second, the court found that it is difficult to find that the defendants A and B committed breach of duty in the course of managing the association, and that it appears there was still the outstanding service fee at the time of the payment of an additional KRW 150 million in the name of land work to the entity operated by Defendant A. Therefore, it is difficult for the court to find that this part of the indictment has been proven. The court acquitted the defendants A and B, and acquitted defendant C, a representative of the business agency, of which case was heard in a separate lawsuit.

This case is significant in that it clarified the importance of securing land for a local housing association project and details of necessary work, the scope of legitimate duties according to the status of a chairperson of the local housing association promotion committee, a president of the local housing association and an agency for the project, and the meaning of breach of duty and property damage required to establish the crime of embezzlement.