A. Violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud)

(b) Violation of the Act on External Audit of Stock Companies;

(c) Property in breach of trust;

(d) Forgery of private documents;

(e)the display of a falsified document;

1.(a)(c) A;

2.(a)(c)(d)(e)(B);

Defendants

Promotion for Family Head Service (Public Prosecution) and Maternity (Public Trial)

Law Firm C (Defendant A) a legal entity

Law Firm D (Defendant A)

Law Firm E (Defendant B)

Ulsan District Court Decision 2012Gohap 532,2013Gohap43(Joint) Decided November 15, 2013

Judgment

June 9, 2014

Each part of the judgment of the court below against the Defendants shall be reversed.

Defendant A shall be punished by imprisonment with prison labor for four years and by imprisonment for three years.

However, with respect to Defendant B, the execution of the above sentence shall be suspended for five years from the date this judgment became final and conclusive.

1. Summary of grounds for appeal;

A. Defendant A

1) misunderstanding of facts and misunderstanding of legal principles [Violation of the Specific Economic Crimes Act (Fraud)]

A) It did not adjust profits and losses to attract investment in the instant case, but did not adjust profits and losses in the way that it had been actually committed in the past for the extension of loans and the acceptance of contracts, etc., and did not have any degree of reduction of illegality in the adjustment of profits and losses. Accordingly, the Defendant A did not have the intention of

B) Even if a false audit report was prepared for the purpose of attracting investment of this case, the victims did not believe and invest in such formal audit report while deciding on the investment of this case, but invested in the future value such as the volume of daily income of the stock company. The preparation and presentation of a false audit report does not constitute deception even if it was made and presented, and there is no causal relationship with the investment decision of the victims.

2) Unreasonable sentencing

The punishment (five years of imprisonment) sentenced by the court below to Defendant A is too unreasonable.

B. Defendant B

1) misunderstanding of facts and misunderstanding of legal principles (the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) and the Act on

A) It does not constitute a window dressing accounting that prepares accounting documents to replace project inputs in the instant case with “act of replacing project inputs.” This does not constitute a window dressing accounting because it is merely an early recognition of sale.

B) Even if the early recognition of the sale of household-aged sales constitutes a window dressing accounting, the victims did not report the daily financial statements in 2010, but have made an investment decision by evaluating the future value of the work and evaluating the future value of the work. Therefore, the preparation and presentation of the aforementioned false audit report does not constitute a network act, and there is no causal link with the victims’ investment decision.

2) Unreasonable sentencing

The punishment sentenced by the court below to Defendant B (five years of imprisonment) is too unreasonable.

2. Determination

A. Judgment on the misunderstanding of facts and misapprehension of legal principles by the Defendants

In full view of the following facts and circumstances found by the evidence duly adopted and investigated by the court below and the court below, manipulating the financial statements of the 2010 year project inputs by replacing project inputs as shown in this part of the facts charged constitutes a window dressing accounting. In addition, it is sufficiently recognized that the criminal intent of the Defendants by fraud and such acts constitute deception against the victims, and further, the causal relationship between the victims is sufficiently recognized. Accordingly, it is reasonable for the court below to find the Defendants guilty as to this part of the facts charged, and there is no error of law by mistake of facts or misapprehension of legal principles as alleged by the Defendants. All of the grounds for appeal by the Defendants are without merit.

(i) the volume of daily orders and financial status, etc. around 2010;

A) During the period of the U.S. financial crisis in 2008, as a steel structure, an industrial plant manufacturing and installing company in 1984, Defendant A continued to grow and expand its scale, the volume of water supply has decreased due to the reduction of the quantity of water supply and the amount of operating income has decreased significantly due to the low-price due to high competition among the same enterprises. Nevertheless, the volume of water supply increased actively in the year 2009, and the volume exceeding KRW 150 billion in the year 2010, and KRW 30 billion in the year 2010.

B) Meanwhile, as the number of shares increases due to a large amount of shares issued in around 2010, the operating fund necessary for extinguishing the shares (such as material cost and outsourcing cost that are invested in the manufacturing process reaches about 80% and the amount that is 40% of the advance that is received from the ordering person should be appropriated by the company itself) also has a large amount of increase. In addition, as the raw material price that accounts for at least 65% of the daily selling price has decreased rapidly, the operating rate has decreased, and the loss from exchange loss has occurred (the average loss of KRW 2.5 billion was incurred from January 208 to January 201).

C) According to the ordinary accounting standards of daily nature, the net loss per month was expected to exceed 17 billion won on the financial statements of 2010, which was around December 2010.

2) The motive, details, etc. of attracting investment in the instant case

A) In 2010, Japan has mainly relied on loans from financial institutions. The size of loans with approximately KRW 33.5 billion in 2005 has increased to approximately KRW 10.5 billion in 2010, and accordingly, it was not only the burden of high interest costs, but also the plan for raising funds through capital increase for a third party more than the short-term new loan to resolve the problem, such as the shortage of operating funds due to the explosion of the number of shares in 2010. On the other hand, Japan at that time was expected to have a large amount of deficit due to the reduction of operating income due to low-price and increase in raw materials cost.

B) Around September 2010, Japan concluded an investment consultation agreement with F of F of F Accounting Firm on F related to the inducement of investments, and around that time, F made an investment consultation with the victim AF Green Growth Investment Company (hereinafter “AF Green Growth Investment Company”) through F’s brokerage. The victim AFFE opened an investment deliberation committee to determine whether to invest in the daily nature on December 2010, but the financial statements in 2010 were finalized, the decision to suspend investment was made on the basis of the review and decision to suspend investment.

C) Defendant A held the responsibility for the aforementioned decision to withhold the investment, thereby excluding G of the head of the fund department who has been in charge of the business of attracting daily investments from the investment attraction business, and H had H continue to conduct the said investment attraction business.

(iii) response to the feasibility of the decision on the deferment of investment, the decision on the investment of victims, etc.

A) Around January 201, Defendant A instructed H to the effect that “The sales cost would be transferred to another place at this point, and the sales cost would be more than 3% below the sales revenue.” Defendant B also instructed that “I would like to make a settlement as to whether there would be any profit if the company would incur a loss,” and that “I would like to make a settlement as to whether there would be a profit if the company would incur a loss.” Accordingly, H drafted a report on 18.15 billion won among the cost of the 21 project, where the actual generation cost is higher than the expected cost or the receiving cost, and then transferred the sales revenue to another 27 projects where the total cost would be KRW 19.28 billion, which is being implemented, to the 19.27 projects where the sales cost would be increased by 1.69 billion won, 17.66 million won, and 200 billion won per fiscal year.”

B) He explained the above report to Defendant B and received approval first, and thereafter, he explained the above report to Defendant A and obtained approval on February 7, 201 by the J, which was the executive director at the time of re-election, around February 7, 2011. The Defendant A signed the above report and gave written approval to Defendant A and made several parts of the column signed by Defendant A and B after 1 to 2 minutes. After the victims filed a complaint, Defendant A stated that “this draft was made with J, not only by giving instructions, but also by 1 to 2000 Formula.” On the other hand, Defendant A presented 1 to the 6th anniversary of the above draft statement and the result of the conciliation result and financial statements as follows. The above report contains the content of adjusting the sales amount and net income as above, and the content of the changed audit report as 1 to 30th of the 10th of the 20th of the 1st of the 2nd of the 1st of the 2nd of the 2nd of the 3th of the 2nd of the 3th of the 2th of the 2th of the 3th of the 2 accounting report.

C) On March 201, 201, the victim ABK submitted an audit report on the financial statements in the year 2010, which was prepared by AB and H, from around the middle to the lower police officer, the victim AB, and then revoked the previous decision to withhold investment, and entered into a performance investment contract on April 13, 201. On the other hand, the victim CF, who received an investment proposal from F on January 201, received the data and the statement of opinions under the above procedure, to receive KRW 50 billion investment as stated in the facts charged.

4) Circumstances after the attraction of investment

A) According to the success of attracting investment as above, Japan paid F a successful fee of KRW 1.65 billion to F, and paid KRW 470 million to the employees of the daily nature in charge of attracting investment (Defendant B, Defendant B, KRW 100 million, etc.) as a reward.

B) On September 21, 201, which was five months after the conclusion of an investment attraction contract as above, Japan was known that "net Loss of the fiscal year of 2011" was expected to have occurred at approximately KRW 89.5 billion to the victim ABK, and the victim ABK requested a daily verification of the nature to Korea-U.S. Accounting Corporation around September 201. According to the due diligence report of Korea-U.S. Accounting Corporation at the time, the net assets as of the end of 2010 were merely KRW 38.8 billion, and the net assets as of the end of 2010 were found to have a large difference with KRW 96.7 billion on the daily financial statements. This is the daily financial statements to include the sales claims excessively exceeding KRW 2.7.3 billion, and to include approximately KRW 2.9.6 billion in the amount of losses incurred by public trust assets at the time of 13.5 billion on the same date, the victim filed an application for rehabilitation of the amount of 1.5 billion won on the financial statements.

5) Illegality of financial statements, etc. in 2010

Article 2 (1) 15 of the Investment Contract entered into with the victim ASEAN case No. 2 (1) of the Investment Contract. The financial statements of the Investment Company subject to the investment have been prepared appropriately and fairly by the Financial Accounting Standards recognized as one-half of the Republic of Korea. The financial statements of the Investment Company are indicated appropriately and fairly, and they have not fulfilled obligations." Meanwhile, corporate accounting standards and subparagraph 4 of the same Article recognize that "the profits from the provision of services can be presumed to be reliable when the results from the provision of services can be presumed to have been reliable if all the following conditions are met. (A) The possibility of inflow of economic benefits is high. (c) The financial statements of the Investment Company subject to the investment has already been prepared in accordance with the Financial Accounting Standards recognized as one-half of Korea. (d) The disclosure of the cost and sales revenue of the Investment Company has already been made in accordance with the Financial Accounting Standards for the purpose of measuring the cost and sales revenue of the Investment Company, such as the announcement of the change in the cost and sales revenue of the Investment Company."

6) As to the Defendants’ assertion

A) The Defendants’ defense counsel argued to the effect that “F provided the victims with false information or data, such as “the estimated net income per year 201 should reach 39.3 billion won without contact with the Defendant in order to attract investments.” However, considering the e-mail, etc. submitted by Defendant A at the trial of the first instance, the Defendants’ defense counsel stated that “F will provide the victims with false information or data, such as “The estimated net income per year 201 should reach 39.3 billion won,” but, in light of the aforementioned e-mail, etc. submitted by Defendant A by the defense counsel at the investigation agency, the Defendants’ defense counsel provided the said e-mail, etc. at the investigation agency, with daily (G and H, etc.) for the inducement of investments, and that “F provided the investors with reasonable correction in the process,” and that it is difficult to accept the said e-mail from the Plaintiff’s prior to the conclusion of the contract.” In light of the above e-mail content and the e-mail research company’s explanation.

나 ) 또한, 피고인들의 변호인들은 당심에서 '피해자들이 일성의 2010년 재무제 표를 보고 투자한 것이 아니라 일성의 미래가치를 보고 투자한 것이다'라고 극구 주장 하면서 그 근거로, ① 2010. 11.경 피해자 아이비케이옥터스와 일성 사이에 이미 위 피 해자가 일성의 주식을 주당 17,000원에 인수하기로 하는 내용의 투자양해각서(피고인 A 제출의 증 제10호 참조)가 작성되었는데, 위 투자양해각서에 "전환가액의 조정 (Refixing)"이라고 하여 2011년 일성의 당기순이익에 따라 전환가격을 조정할 수 있다 고 규정하면서 2011년의 목표 순이익을 이미 393억 원으로 정하고 있었던 점, ④ 피해 자들은 2011. 3. 15. 투자심의위원회를 열어 투자결정을 하였는바 , 일성의 분식회계에 따른 2010년도 재무제표에 대한 안진회계법인의 감사보고서가 2011. 3. 17.자로 작성 되어 위 투자결정 이후에 피해자들에게 제공된 점을 들고 있다. 그러나 ① 위 투자양 해각서는 앞서 본 바와 같이 F이 피해자 아이비케이옥터스에 제공한 일성의 자료를 기 초로 작성한 것으로서 위 피해자 측이 스스로 그와 같은 일성의 2011년도 당기순이익 을 예측한 것은 아닌 점(앞서 본 이메일의 내용 등에 따르면, F은 위와 같은 자료를 일성 측과 협의하거나 건네받아 제출하였고, 그와 같은 자료를 넘겨받은 피해자 아비 비케이옥터스의 K 등은 F을 통하거나, 혹은 직접 일성의 H 등에게 매출채권 관련 회 계자료 등을 요청하여 이를 제공받은 사실을 알 수 있다), ② 또한, 투자심의위원회의 의결 및 회계실사 등의 과정을 거쳐 본계약이 체결되지 않은 상태에서 위 양해각서는 그 자체로 어떤 효력을 갖지는 못하는 점, ③ 당시 피해자들의 투자업무를 담당했던 K, L는 원심에서 '2011. 3. 15. 일성에 대한 투자심의위원회를 열어 투자결정을 하였으 나, 이는 나중에 투자실적을 확인하기로 한 조건부 승인이었다' 는 취지로 진술하고 있 고 , 실제로 투자심의원회가 2011. 3. 15. 열린 뒤 그 다음날인 2011. 3. 16.부터 7일간 피해자 아이비케이옥터스가 선임한 회계법인에 의해 일성의 회계실사가 이루어진 점 (피고인 A의 변호인이 당심에서 제출한 이메일 내용 등 참조), ④ 안진회계법인이 감 사보고서를 작성한 일자가 2011. 3. 17.자라 하더라도, 그 이전에 이미 왜곡된 재무제 표의 내용을 뒷받침하는 내용으로 진행률 산출관련 요소가 변경된 채 그 관련 자료들 이 피해자들 측에 제공되었고, 이에 따라 피해자들 측은 자료에 대한 실사과정 등을 통해 일성이 2010회계연도에 양호한 실적을 올린 것으로 보았으며, 그 무렵 나온 안진 회계법인의 '적정의견 표명은 적정하게 회계가 이루어졌다는 피해자들의 믿음을 강화 하는 자료가 되었다고 볼 수 있는 점, ⑤ 유상증자에 따른 주식을 인수하는 방식으로 투자함에 있어 투자자는 기업의 미래가치를 보고 투자하는 것이 당연하나, 그러한 미 래가치는 그 기업의 과거 및 현재의 실적을 기초로 예측되는 것이므로, 피해자들의 입 장에서 위와 같은 일성의 2010회계연도 재무상태를 실제대로 보고받았다고 한다면, 이 사건과 같이 투자결정을 하지는 않았을 것이 명백한 점[특히, F을 통하여 피해자 아이 비케이옥터스에 제공된 일성의 손익계산서상 연도별 당기순이익은 2007년 65억 원 , 2008년 53억 원, 2009년 16억 원, 2010년 64억 원( 예상), 2011년 393억 원( 예상), 2012 년 493억 원(예상), 2013년 515억 원( 예상)으로 되어 있는바, 이러한 내용에 따르면, 일 성은 원재료가격의 상승, 환차손, 저가수주 등에도 불구하고 수주물량의 큰 폭 증가로 인해 영업이익이 매년 큰 폭으로 증가한다는 것이다. 그러나 앞서 본 바와 같이 2010. 12.경 일성은 이미 2010년도 당기순손실이 170억 원 정도 예상되어 실제로도 그러하였 으며, 나아가 2011회계연도에는 1,516억 원의 적자가 발생하였는데, 위와 같이 마치 큰 이익이 발생할 것처럼 제시된 내용은 일성의 재무상태의 실상을 왜곡 반영한 결과가 명백하다 . 나아가 가령, 피고인들의 주장과 같이 '프로젝트간 투입원가 대체방식'으로 2010년도 당기순이익을 68억 원으로 조정하는 것이 수익을 가장하는 것이 아니라 매 출의 조기인식에 해당하여 정당한 것으로 본다면 그와 같이 매출이 조기인식 됨에 따 라 결국 2011년 이후 더 큰 적자가 발생하게 되는 셈이어서, 기업의 미래가치를 보고 투자하는 투자자에 대한 기망행위가 됨은 분명하다] 등 앞서 든 증거 등에 의하여 알 수 있는 여러 사정에 비추어 위 변호인들의 주장은 받아들일 수 없다.

B. Determination of unfair sentencing on the assertion of unfair sentencing

1) Defendant A

Defendant A’s increased amount reaches KRW 320 million in total. The instant fraud and the instant crime of violation of the Act on External Audit of Stock Companies was committed by Defendant A, a representative director of the daily nature, ordered H to prepare accounting data which unfolded the net income by ordering H to replace the project input cost, and based on this, by deceiving the victims to disclose false financial statements, and received KRW 50 billion from the victims. In light of the method of the crime, the degree of Defendant A’s participation in the crime, and the amount of fraud, etc., the liability for the crime was significant; Defendant A denied the crime of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) and did not reflect his mistake.

On the other hand, Defendant A’s crime of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) and the Act on External Audit of Stock Companies was committed not to gain personal benefits but to secure funds for the operation of the work hard to find out, and there are extenuating circumstances to bring about a small amount of KRW 5 billion in total to the victims of fraud, and the victims can recover a large amount of KRW 12.5 billion in total from the daily rehabilitation procedure to the rehabilitation claim, and the victims can recover a large portion of the above amount. In addition, the fact that most of the shares owned by the defendant are secured from the victims through the execution of the pledge right, as the representative of the Japanese sex, Defendant A seems to have been making efforts to recover the damage of investors and to make funds to make funds to the victims, and that there is no criminal history or any criminal history of qualification suspension, and that there is no social favorable relationship between Defendant A and the victim.

In light of the above conditions favorable or unfavorable to Defendant A, and all of the sentencing conditions indicated in the instant pleadings, such as the age, character and conduct, and environment of Defendant A, the sentence imposed by the lower court to Defendant A seems to be somewhat unreasonable. Therefore, this part of the grounds for appeal by Defendant A is with merit.

2) Defendant B

Defendant B’s each crime of this case is due to the following: (a) in order to find out the competitor’s bid price, to deliver KRW 320 million to the executives of the competitor; (b) to make the company’s net income for the current term and publicly announce false financial statements; (c) by deceiving the trust company, by deceiving the investment company, and by forging documents related to the license in order to obtain power generation equipment; and (d) the liability for the crime is not easy; and (e) Defendant B denied the crime of violation of the law (Fraud) committed by the Specific Economic Crimes Aggravated Punishment, etc. of Specific Economic Crimes Act; and (e) did not properly reflect his fault.

On the other hand, Defendant B’s crime of violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) and the Act on External Audit of Stock Companies was committed according to the direction of Defendant A, the representative director, in the process of securing funds for the operation of personal benefits, not to gain personal benefits. The crime of giving property in breach of trust and forging private documents was committed for the activities of the company, not personal benefits, and thus, there are circumstances to consider the motive for the crime, and the daily nature was repaid to the victims of fraud in total KRW 5 billion. It seems that the victims can recover the total amount of KRW 12.5 billion each from the first rehabilitation procedure after the victims became final and conclusive as rehabilitation claim. In addition, the victims secured most of the shares of the sex owned by the Defendant through the execution of the pledge right, and Defendant B and his wife and two children (one and three years old) must support the victim. There is no specific penalty other than twice, and there is no social favorable relationship between them.

As above, all of the sentencing conditions shown in the argument in this case, such as the favorable or unfavorable circumstances to Defendant B, and the age, character and conduct, environment, etc. of Defendant B, were detained on December 6, 2012, and up to 18 months have been detained. However, even if imposing the treatment to Defendant B within the company of the suspension of the execution of imprisonment, it appears that the special preventive effect could be sufficiently achieved even if it is imposed. The person who actually owns and operates the sex, is Defendant A and Defendant B is involved in or committed the crime in this case in order to obtain the father’s instructions or meet its expectation. Considering that the court below sentenced Defendant B to four years of imprisonment at the trial, the sentence imposed on Defendant B is too unreasonable. Accordingly, this part of the grounds for appeal by Defendant B is with merit.

【Grounds for a new judgment】

Criminal facts

Since criminal facts against the Defendants recognized by this court are the same as the corresponding column of the judgment of the court below, they are quoted in accordance with Article 369 of the Criminal Procedure Act.

Summary of Evidence

The summary of the evidence against the Defendants recognized by this court is as stated in each of the corresponding columns of the judgment below, except for the addition of 1. A’s partial statement at the trial, 1. Witness M and N’s partial statement at the trial, and 1. Witness M and N’s partial statement at the trial at the time of original trial, the summary of the evidence at the time of original trial is as stated in each of the corresponding columns of the judgment below. Therefore, it is cited as it is in accordance with Article 369

Application of Statutes

1. Article relevant to the facts constituting an offense and the selection of punishment;

A. Defendant A: Articles 357(2) and (1), and 30 of the Criminal Act (the point of giving property in breach of trust, the choice of imprisonment with labor), each of Article 3(1)1 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes, Articles 347(1) and 30 of the Criminal Act (the point of fraud, the choice of limited imprisonment), Article 20(1) of the Act on External Audit of Stock Companies, Article 30 of the Criminal Act (the preparation and public announcement of false financial statements, the choice of imprisonment with labor)

B. Defendant B: Articles 357(2) and (1), 30(a), 231, and 30(a) of the Criminal Act, Articles 231, and 30(a) of the Criminal Act, Articles 234, 231, and 30(a) of the Criminal Act, Article 3(1)1 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes, Articles 347(1), and 30(a) of the Criminal Act, Article 20(1) of the Act on External Audit of Stock Companies, Article 30 of the Criminal Act (a) of the Act on External Audit of Stock Companies, Article 30 of the Criminal Act (a preparation and public announcement of false financial statements, a choice of imprisonment)

1. Aggravation for concurrent crimes;

Articles 37 (former part), 38 (1) 2, and 50 of the Criminal Act

1. Discretionary mitigation;

Articles 53 and 55 (1) 3 of the Criminal Act (The favorable circumstances among the grounds for reversal against the above Defendants)

1. Suspension of execution (Defendant B);

Article 62(1) of the Criminal Act ( considered for repeated consideration of favorable circumstances among the grounds for reversal against the above defendant B)

Gunam-do (Presiding Judge)

Park Do-young

Anti-Sickdong

The presiding judge