1. Case Overview

The Central Regional Tax Office executed a search and seizure warrant against a manpower supply company, suspecting the issuance and receipt of false tax invoices, tax evasion, etc. The investigation by the police and prosecution continued for four years after the company representative was reported. During the investigation, the prosecution additionally recognized embezzlement, which was not included in the initial report, and conducted a high-intensity investigation by repeatedly summoning the company representatives and employees. Subsequently, the prosecution requested arrest warrants for the two company representatives, citing reasons such as the severity of the crime, the likelihood of denying the charges, or the possibility of denial, and lack of remorse.

2. Key Issues

In the manufacturing, production, and logistics sectors, there is high demand for manpower, but the supply is insufficient. The wage level set by the original contractor is low, and workers have low loyalty, making it impossible for the manpower supply company to independently recruit manpower at a level corresponding to the original contractor’s demand. For these reasons, it is common for several manpower supply companies to cooperate in recruiting manpower or collaborate through introductions, recommendations, and mediations among the companies. Given that the company was established to actually carry out manpower supply operations, and transactions of introductions, recommendations, and mediations existed among companies, it is difficult to conclusively determine that all the tax invoices exchanged in the process were false. While the judgment on this issue was pending, the prosecution newly recognized embezzlement by the two company representatives and requested arrest warrants during the four years of ongoing investigation.

3. Our Role and Implications

We sufficiently clarified the following circumstances during the substantive examination of the arrest warrants, and the court took these into account and dismissed all requests for arrest warrants:

 (i) There was no concern about destruction of evidence or flight, as shown by the sincere cooperation during the four-year investigation, and there is a legal aspect of dispute, but there is no dispute regarding the facts;

 (ii) Requests for information disclosure (record inspection), and the appointment of legal counsel are constitutional and legal rights, and these cannot be considered as grounds for possible evidence destruction; and

 (iii) There are some factual errors in the arrest warrant application, and there are legally significant issues in the initial report, so it is necessary to guarantee the right to defense.

We explained the background of frequent tax cases in the manpower supply industry and the circumstances of the companies, persuading that this falls within the legitimate scope of the right to defense. The court accepted this, dismissing all arrest warrants, which will serve as important reference for similar cases in the related industry in the future.

□ Attorneys in charge: Kang Tae-Hun, Chung Yang-Hun, Kim Yong-Hyun