[1] The meaning of "profit from a violation" under the proviso of Article 443 (1) and Article 443 (2) of the Financial Investment Services and Capital Markets Act, and in cases where a representative, etc. of a corporation committed a violation under Article 443 of the same Act as an organization of a corporation, whether the profit gained by the corporation from the violation is included in the profit gained by the corporation from

[2] In a case where the actual manager and the representative director of the corporation Gap et al. conspired to prepare a registration statement related to the subscription for new shares that Gap company planned to implement and entered a plan to use funds different from the actual amount and were found to be in violation of the Financial Investment Services and Capital Markets Act, the case affirming the judgment below holding that the defendants' profits derived from the false statement in the registration

[3] The meaning of "self-denunciation" under Article 52 (1) of the Criminal Code, and whether the court below's measure which did not decide on "self-denunciation" or "self-denunciation mitigation" is unlawful (negative)

[4] In a case where the defendant received money and valuables in relation to his business, who is an employee of a financial institution, and was prosecuted for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Aggravated Punishment, etc. of Specific Economic Crimes), the case holding that the court below's decision that the defendant cannot be viewed as "self-denunciation" if he was present at the second investigative agency and led to an investigation, and that the defendant cannot be viewed

[1] In principle, the term “profit accrued from a violation” under the proviso of Article 443(1) and (2) of the Financial Investment Services and Capital Markets Act refers to the profit gained by the violator, and the profit accrued to a third party who does not participate in the crime shall not be included in the profit accrued to the third party. However, where the representative, etc. of a corporation committed a violation under Article 443 of the Financial Investment Services and Capital Markets Act regarding the corporation’s business as an organization, the profit accrued to the corporation is also included in the profit accrued from the violation such as the representative of the corporation

[2] In a case where the actual manager and the representative director of the KOSDAQ-listed corporation Gap corporation Gap et al. conspired to prepare a registration statement and an investment prospectus related to the capital increase with respect to which Gap corporation Gap corporation planned to offer, and entered a plan different from the actual plan for the use of the funds to be raised through capital increase, and were found to be in violation of the Financial Investment Services and Capital Markets Act, the case affirming the judgment below that the defendants' profits derived from the false statement in the registration statement

[3] The phrase "self-denunciation" under Article 52 (1) of the Criminal Code refers to a confession that the criminal voluntarily reports the crime to a government agency responsible for the investigation and voluntarily seeks the disposition. As such, it is only a confession to respond to an official questioning or investigation by an investigative agency, and further, the self-denunciation is constituted by the criminal investigation agency’s expression of intent. As such, the internal intent alone is insufficient and it can be acknowledged that it should be externally indicated. In addition, even if the criminal voluntarily surrenders himself/herself, it is merely the fact that the court can voluntarily reduce the punishment for the self-denunciation, and thus, the court below’s failure to reduce the number of self-denunciation or to make a decision on the allegation for mitigation of self-denunciation

[4] In a case where the defendant received money in relation to his business as an employee of a financial institution and was prosecuted for a violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Aggravated Punishment, etc. of Specific Economic Crimes) on the ground that he received money in relation to his business, the case holding that the defendant cannot be viewed as a self-denunciation because he could voluntarily reduce his punishment even if he voluntarily surrenders to the police, because he did not make a judgment as to his mistake in violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Aggravated Punishment, etc. of Specific Economic Crimes) since he voluntarily attended the investigative institution

[1] Article 43 (1) and (2) of the Financial Investment Services and Capital Markets Act / [2] Article 30 of the Criminal Act; Articles 178 (1) 2, 443 (1) 8, and 443 (2) 1 of the Financial Investment Services and Capital Markets Act / [3] Article 52 (1) of the Criminal Act; Article 323 (2) of the Criminal Procedure Act / [4] Article 52 (1) of the Criminal Act; Article 5 (1), (4) 1, and (5) of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes; Article 323 (2) of the Criminal Procedure Act

[1] Supreme Court Decision 201Do7622 Decided April 28, 2011, Supreme Court Decision 2011Do3180 Decided July 14, 2011 (Gong2011Ha, 1686) / [3] Supreme Court Decision 2001Do872 Decided April 24, 2001 (Gong2001Sang, 1300), Supreme Court Decision 2002Do1893 Decided June 25, 2002, Supreme Court Decision 2004Do2018 Decided June 11, 2004 (Gong204Ha, 1198), Supreme Court Decision 203Do31333 Decided October 14, 2004)

Defendant 1 and five others

Defendant 1 and four others and the Prosecutor

Attorneys Kim Jong-soo et al.

Seoul High Court Decision 2011No183 decided August 26, 2011

All appeals are dismissed.

The grounds of appeal by the Defendants and the prosecutor (to the extent of supplement in case of supplemental appellate briefs not timely filed) are examined together.

1. As to the ground of appeal on the violation of the Financial Investment Services and Capital Markets Act

A. As to Defendant 1 and Defendant 2’s grounds of appeal

(1) Whether a false statement was made on material facts pertaining to trading, etc. of financial investment instruments, and whether Defendant 2 conspireds with each other

“Important matters” under Article 178(1)2 of the Financial Investment Services and Capital Markets Act (hereinafter “Financial Investment Services and Capital Markets Act”) means matters that may have an effect on fair trade in specific securities, etc. and investors’ investment judgment as matters necessary to protect the property and management of the pertinent corporation (see Supreme Court Decision 2011Do8109, Oct. 27, 201). In addition, if two or more persons jointly process and commit a crime, the public offering or conspiracy does not necessarily need to be carried out directly and explicitly, and in some cases, it may be carried out through a combination of will to realize it jointly, and if the Defendant denies the use of material nonpublic offering, it is necessary to establish a specific crime with a view to 0 criminal intent to directly or indirectly, and to establish a specific crime with a view to 20 criminal intent to directly or indirectly bear functional control over the crime (see, e.g., Supreme Court Decision 201Do8109, Oct. 27, 201).

In full view of the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning. In preparing a registration statement and an investment prospectus (hereinafter “instant registration statement, etc.”) relating to the amount of KRW 26.6 billion (hereinafter “instant capital increase”) to be carried out by Nonindicted Co. 1 in collusion with Defendant 1, Defendant 2 stated a plan different from the actual use plan of the funds to be raised through capital increase with regard to the plan to use the funds, which constitutes “a false statement on important matters” as provided by Article 178(1)2 of the Financial Investment Services and Capital Markets Act, and Defendant 1 and Defendant 2 recognized criminal intent as to the aforementioned false statement, and recognized causation between the false statement on the instant registration statement, etc. and the success of the instant capital increase.

In light of the above legal principles and the records, the judgment of the court below is acceptable as it is in accordance with the above legal principles, and contrary to the allegations in the grounds of appeal, there are no errors of violating the principle of free evaluation of evidence selection or fact-finding.

(2) As to the calculation of the profit accrued from the violation

The term “profit accrued from a violation” under the proviso of Article 443(1) and (2) of the Financial Investment Services and Capital Markets Act means, in principle, the profit accrued from the violation, and the profit accrued to a third party who did not participate in the crime does not include the profit accrued to the third party (see Supreme Court Decision 2011Do3180, Jul. 14, 201). However, where a representative, etc. of a corporation committed a violation under Article 443 of the Financial Investment Services and Capital Markets Act with respect to the corporation’s business as an institution, the profit accrued from the violation shall also be included in the profit accrued from the violation

After compiling the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning, and determined that the profits earned by Defendant 1 and Defendant 2 due to the false statement in the instant registration statement, etc. include the amount paid for capital increase with capital gains of this case.

In light of the above legal principles and records, the judgment of the court below is just and acceptable as it is in accordance with the above legal principles. Contrary to the allegations in the grounds of appeal, there were no errors of exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or recognizing facts, or of misunderstanding the legal principles as to the subject of

B. As to the Prosecutor’s Grounds of Appeal

Examining the reasoning of the judgment below in light of the records, the court below is justified in finding that there was no evidence of the crime as to the facts charged that Defendant 6 conspired with Defendant 1 and Defendant 2 on the instant registration statement, etc., and found the Defendant not guilty of the above facts charged. Contrary to the allegations in the grounds of appeal, the court below did not err by exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or recognizing facts

2. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) with respect to the shares of Nonindicted Co. 2

Examining the reasoning of the judgment below in light of the records, the court below is justified in finding that there was no proof of the crime as to the facts charged that Defendant 1 and Defendant 2 conspired and embezzled 200,000 won of the market price of Nonindicted Co. 1’s shares owned by Nonindicted Co. 1 and the market price of Nonindicted Co. 2’s shares owned by Defendant 1 for business purposes, and that there was no evidence of the crime. In so doing, the court below did not err by exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or recognizing facts

3. As to the grounds of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) and occupational embezzlement relating to the funds of Nonindicted Co. 1

If the representative director of a corporation withdraws and uses the company's money, and fails to present evidentiary documents on the place of its withdrawal and fails to give reasonable explanation to the source of use of money, such money may be inferred to withdraw the company's money with the intent of unlawful acquisition and use it for personal purposes (see Supreme Court Decision 2007Do9250, Mar. 27, 2008, etc.).

After compiling the adopted evidence, the court below acknowledged the facts as stated in its reasoning, and determined that each act of withdrawal of funds listed in the defendant 1's list of crimes (1), 1, 2 and 4 constitutes an act of occupational embezzlement against the non-indicted 1 corporation.

In light of the above legal principles and records, the judgment of the court below is justified and acceptable. Contrary to the allegations in the grounds of appeal, there is no violation of law by exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or finding facts.

4. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) relating to the 550,000 shares of Nonindicted Co. 4

Examining the reasoning of the judgment below in light of the records, the court below held that there is no evidence to prove the crime of embezzlement of 550,000 won of the market price of the non-indicted 1 corporation owned by the non-indicted 1 corporation, which is 1,760,000 won of the market price of the non-indicted 1 corporation for business purposes, and found the defendant not guilty of the facts charged, and there is no violation of law of free evaluation of evidence selection or fact-finding, contrary to what is alleged in the

5. As to the grounds of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) and occupational embezzlement regarding the funds of Nonindicted Co. 3

After compiling the adopted evidence, the court below acknowledged the facts as stated in its reasoning, and determined that each act of withdrawal of funds listed in the defendant 1's list of crimes (2), 2, 3, 9 and 14 constituted an act of occupational embezzlement against the non-indicted 3 corporation.

In light of the above legal principles and records, the judgment of the court below is justified and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors of law by exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or finding facts.

6. As to the ground of appeal on the violation of the Act on External Audit of Stock Companies based on the false disclosure of the 17th half-year financial statements of Nonindicted Co. 1

Examining the relevant provisions of the Act on External Audit of Stock Companies (hereinafter “ External Audit Act”) and the Enforcement Decree thereof, the financial statements subject to audit by an external auditor under the External Audit Act shall be the financial statements subject to the approval of a regular general meeting of shareholders in each fiscal year, i.e., settlement financial statements, which are the financial statements subject to the regulation of the External Audit Act (see Supreme Court Decision 2008Do4068, Jul. 10, 2008, etc.). Meanwhile, in a case where the court recognizes a minor criminal facts included in the criminal facts charged within the scope consistent with the facts charged, where it is deemed that there is no risk of causing substantial disadvantage to the defendant’s exercise of his/her right to defense in light of the progress of the trial, even if the indictment has not been modified ex officio, but if it does not punish them even if it does not constitute such a case, it shall not be deemed that the court ex officio did not recognize such criminal facts in light of the purpose of criminal procedure, which is the discovery of substantial truth by the appropriate procedure, and shall not be deemed unlawful until the court has ex officio (see Supreme Court Decision 1010Do1010.

In this case, even if Defendant 1 prepares a false financial statement on the 17th half year of the non-indicted 1 corporation (on January 1, 2009 and June 30, 2009), since the statutory punishment for the violation of Article 444 subparagraph 13 (e) of the Act on External Audit is greater than that of the violation of Article 20 (1) of the Act on External Audit, it is difficult for the court to find Defendant 1 guilty of the violation of Article 44 subparagraph 13 (e) of the Act without the amendment of the indictment that could not cause substantial disadvantage to the defendant's exercise of his defense right, and it cannot be deemed that the non-guilty of the violation of Article 444 subparagraph 13 (e) of the Capital Markets Act does not significantly violate justice and equity. Accordingly, the conclusion that the court below tried and judged only for the violation of the Act on External Audit and Inspection, and there is no error in the misapprehension of legal principles as to the court's duty of adjudication, contrary to what is alleged in the grounds of appeal.

7. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) regarding the purchase of shares by Nonindicted Co. 5

In determining whether a company had an intent to commit an occupational breach of trust in relation to a management judgment, the same legal doctrine as the method of proving an intentional act is applied to the general crime of occupational breach of trust. However, even if a manager has made a prudent decision with the belief that the management is consistent with the interests of the company based on the information collected in good faith and without intent to take any personal benefits because the risks inherent in the management of the company, there may be cases where the prediction occurs losses to the company. In such a case, if the interpretation criteria for intentional breach of trust were to be mitigated to impose a criminal liability for occupational breach of trust, this would be against the principle of no punishment without the law, and even in a policy perspective, even if the company, which is the source of operating income, causes a serious loss as well as the relevant company, and thus, even if the legal doctrine that the crime of breach of trust under the current Criminal Act is a crime of occupational breach of trust, it is difficult to deny the legal doctrine that the corporate management judgment at issue, the economic situation of the company, the probability of losses incurred by the company, or the risk of the third party’s pecuniary gain.

Examining the reasoning of the judgment below in light of the records, although Defendant 2 had not purchased the shares of Nonindicted Co. 5 with the shares issued by Nonindicted Co. 5 with the shares issued by Nonindicted Co. 1, 26,960, the lower court, based on its reasoning, purchased KRW 282,000 won of the shares issued by Nonindicted Co. 5 from Nonindicted Co. 6, and acquired KRW 7,550,000 won of the above Nonindicted Co. 6, etc., and suffered property loss equivalent to the same amount of the victim Nonindicted Co. 1, and even if it is necessary to acquire the shares of Nonindicted Co. 5, Defendant 2 determined that the above Nonindicted Co. 6, etc. purchased the shares of Nonindicted Co. 5 with KRW 25,00 per share above and KRW 26,960, and had the above Nonindicted Co. 5, etc. acquire the shares issued by Nonindicted Co. 282,00 won with the legitimate value of KRW 282,500,00 per share,000.

8. As to the grounds of appeal on Nonindicted Co. 1’s occupational embezzlement of KRW 240 million and KRW 200 million

In a case where the defendants denies the existence of an intent of unlawful acquisition by asserting that the defendant had withdrawn and used the funds for the company while recognizing the fact that the defendant used the funds for the company, whether the defendant's use of the funds for the purpose of the company's ordinary expenses incurred in the course of operating the company can be deemed reasonable to bear the expenses, and whether the decision on the specific timing, object, scope, amount, etc. of the use of the funds was made objectively and reasonably (However, in light of the general process of raising the funds or the nature of the funds, even if there is no internal regulations or the resolution of the board of directors, such circumstance alone does not necessarily mean that the existence of the defendants' intent of unlawful acquisition by the use of the funds can be acknowledged) and whether the main purpose of the use of the funds for the funds can be determined by comprehensively taking into account the timing, circumstances, and result of the use of the funds for the funds for the purpose of personal use by the defendants (see Supreme Court Decision 200Do4747, Feb. 26, 2009).

Examining the reasoning of the judgment below in light of the records, the court below held that there is no proof of each crime against each of the charges of embezzlement by allowing Defendant 2 to pay KRW 2.4 million to Defendant 4 and Nonindicted 10,000,000 as the consideration for acceptance of bonds with warrants in collusion with Nonindicted 7 or Nonindicted 8, and to make Nonindicted 7 arrange for acceptance of bonds with warrants in an amount equivalent to KRW 8 billion issued by Nonindicted 1 Company 9, and to pay KRW 2.4 million in total to Nonindicted 4 and Nonindicted 10,000,000 in return for such referral, and that there is no proof of each crime against each of the charges of embezzlement by allowing Nonindicted 8 to pay KRW 200,000 to Defendant 3, who is an employee of Nonindicted 11 Company who acquired bonds with warrants in an amount equivalent to KRW 5 billion issued by Nonindicted 1 Company. Contrary to the allegations in the grounds of appeal, all of the charges are justified.

9. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) relating to KRW 1.75 billion of the funds of Nonindicted Incorporated Company 12

The establishment of facts constituting a crime in a criminal trial ought to be based on strict evidence with probative value, which leads a judge to have such convictions as to the extent that there is no reasonable doubt. Thus, in a case where the prosecutor’s proof fails to sufficiently reach the extent that such convictions may lead to such convictions, the determination ought to be made in the interests of the defendant even if there is suspicion of guilts, such as the defendant’s assertion or defense is contradictory or uncomfortable (see Supreme Court Decision 2010Do1487, Apr. 28, 201).

Examining the reasoning of the judgment below in light of the records, the court below held that there is no proof of the crime against Defendant 2's primary charges that Defendant 2 embezzled KRW 1.755 million in total of the funds of the victim non-indicted 12 corporation by ordering the non-indicted 13 to use the funds of the victim non-indicted 12 corporation for the repayment of personal loan funds to Defendant 1, and that Defendant 2 lent KRW 1.755 million in total to Defendant 1, who had no possibility of repayment of the funds of the victim non-indicted 12 corporation to the non-indicted 13 and embezzled them by lending them to the non-indicted 1, who had no possibility of repayment of the borrowed funds, and it is just to recognize all the primary charges and the non-guilty charges. Contrary to the allegations in the grounds of appeal, there is no

10. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Proof)

After compiling the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning, and determined that Defendant 2’s act of having Defendant 3, an employee of Nonindicted Co. 11, who acquired bonds with warrants equivalent to KRW 5 billion issued by Nonindicted Co. 8, paid KRW 200 million to Defendant 3, who was an employee of Nonindicted Co. 11, constitutes an act of giving money and valuables in connection with his duties.

In light of the records, the judgment of the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors of exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or recognizing facts, or of misunderstanding the legal principles as to the crime of proof by financial institutions.

11. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes

The phrase “self-denunciation” under Article 52(1) of the Criminal Act is established when an offender voluntarily reports his/her criminal facts to an investigative agency and voluntarily expresses his/her intent to prosecute the offender. This includes cases where the offender voluntarily appears in an investigative agency after the occurrence of the crime and voluntarily led to confessions. As long as the number of self-denunciation is established, the validity of the number of self-denunciation becomes conclusive after the reversal of the crime and then, it does not extinguish the validity of the number of self-denunciation occurring once the offender denies the crime in the investigative agency or the court. However, even though a report is voluntarily made by an investigative agency, if the content of the report is a criminal act with the content of clearly denying the crime, and it is true that the report does not meet the requirements for establishment of the crime. As long as the number of self-denunciation is not established, there is no room for new self-denunciation to establish even if the offender was at the time of the crime in the subsequent investigation process or trial process. Moreover, since questioning or investigation by an investigative agency is merely a confession, it does not constitute a voluntary self-denunciation of 20130.

According to the records, Defendant 3, who was voluntarily present at an investigative agency and received money and valuables in relation to his business, who is an employee of a financial institution, but was merely borrowed 200 million won at the rate of 5% per annum from Nonindicted 14 with interest rate of 5% per annum, and was subject to the second investigation, and only led to the second investigation, he cannot be deemed as self-denunciation, since he was found to have received KRW 200 million in relation to his business.

In addition, even if Defendant 3 voluntarily surrendered, it is merely a mere fact that the court can voluntarily reduce the punishment for the self-denunciation, and it cannot be said that the court below erred because it did not judge on the assertion of self-denunciation.

The judgment below did not err in the misapprehension of legal principles as to self-denunciation, as alleged in the grounds of appeal.

12. As to the ground of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (reconciliation)

After compiling the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning, and determined that Defendant 4’s receipt of KRW 70,000 from Nonindicted 7 in return for Nonindicted 9’s mutual savings bank to arrange the acquisition of bonds with warrants equivalent to KRW 8 billion issued by Nonindicted Company 1 constitutes an act of receiving money and valuables regarding the intermediation of matters pertaining to the duties of officers and employees of financial institutions.

In light of the records, the judgment of the court below is just and acceptable, and contrary to the allegations in the grounds of appeal, there are no errors of exceeding the bounds of the principle of free evaluation of evidence in selecting evidence or finding facts.

13. As to the ground of appeal on taking advantage of breach of trust

With respect to an appellate judgment dismissing an appeal by a defendant on the sole ground of unfair sentencing, the defendant may not file an appeal on the ground of misconception of facts against the rules of evidence or violation of statutes (see, e.g., Supreme Court Decision 90Do1688, Oct. 10, 1990). In addition, Article 383 Subparag. 4 of the Criminal Procedure Act limits the cases that may be considered as the grounds for appeal on the grounds that there exist significant grounds to recognize the amount of punishment as being extremely unfair, to the cases on which death penalty, life imprisonment, or imprisonment or imprisonment without prison labor for not less than ten years has been sentenced. Thus, the grounds for appeal on the unfair sentencing of a case not corresponding thereto are unlawful (see Supreme Court Decision 2007Do574

According to the records, on March 9, 201, when the judgment of the court below was in progress, Defendant 5 clearly withdrawn the assertion of mistake of facts and misapprehension of legal principles from the grounds for appeal, and left the grounds for appeal only as the grounds for appeal, and the court below dismissed Defendant 5’s appeal.

Therefore, the argument that there was an error of mistake of facts or misunderstanding of legal principles in the judgment of the court below cannot be a legitimate ground for appeal, and further, it is not allowed to appeal the allegation of unfair sentencing in this case where a sentence less than 10 years against Defendant 5 is imposed.

14. Conclusion

Therefore, all appeals are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)