[1] The meaning of "any other fraudulent means" under Article 54 (2) of the former Infant Care Act

[2] Where an operator of a child-care center conducts an “accounting under the Financial Accounting Regulations” with a false increase in expenditures in relation to the operation of a child-care center and received basic infant-care fees by reporting the results thereof, whether it constitutes “where a child-care center operator received subsidies by fraud or other improper means” under Article 54(2) of the former Infant Care Act (negative) and whether it constitutes fraud under Article 347(1) of the Criminal Act (negative)

[1] “False or other unlawful means” under Article 54(2) of the former Infant Care Act (amended by Act No. 11627, Jan. 23, 2013) refers to the active and passive act that may affect the decision-making on granting of subsidies, such as deceptive schemes, although it is not possible to receive subsidies through normal procedures.

[2] According to Article 36 of the former Infant Care Act (amended by Act No. 11627, Jan. 23, 2013; hereinafter the same), Article 24(1)2, 6, and 7 of the former Enforcement Decree of the Infant Care Act (amended by Presidential Decree No. 24904, Dec. 4, 2013; hereinafter the same), and Article 24(2) of the former Enforcement Decree of the Infant Care Act (amended by Presidential Decree No. 24904, Dec. 4, 2013), the following circumstances are revealed in light of the language and purport of the guidance for infant care business in 2012, namely, the implementation of the financial accounting rules under the Financial Accounting Regulations of the 2012, which do not include the financial accounting report of the 2012 Infant Care Act, which does not directly related to the financial accounting report of the 2012 Infant Care Act, and it is difficult to view that the accounting report of the 20120-year Infant Care Act is not related to the accounting report.

Therefore, even if the operator of a child-care center conducts an accounting under the Financial Accounting Regulations with a false increase in expenditures in connection with the operation of the child-care center, and reported the result and received the basic infant-care fees, the circumstances that false involvement in the accounting report can not be deemed to have influenced the decision-making on the payment of the basic infant-care fees, and thus, it cannot be deemed that such act constitutes a crime of fraud under Article 347(1) of the Criminal Act.

[1] Article 54(2) of the former Infant Care Act (Amended by Act No. 11627, Jan. 23, 2013; see current Article 54(2)1); / [2] Articles 36 and 54(2) of the former Infant Care Act (Amended by Act No. 11627, Jan. 23, 2013; see current Article 54(2)1); Article 24 of the former Enforcement Decree of the Infant Care Act (Amended by Presidential Decree No. 24904, Dec. 4, 2013); Article 347(1) of the Criminal Act

[1] Supreme Court Decision 2006Do8870 Decided December 27, 2007, Supreme Court Decision 2011Du30182 Decided December 27, 2012 (Gong2013Sang, 253), Supreme Court Decision 2013Do6886 Decided March 27, 2014

Defendant

Defendant

Law Firm Pyeongan, Attorneys Dai-hee et al.

Incheon District Court Decision 2014No2154 decided February 6, 2015

The judgment below is reversed, and the case is remanded to the Incheon District Court Panel Division.

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

1. “False or other unlawful means” as prescribed by Article 54(2) of the former Infant Care Act (amended by Act No. 11627, Jan. 23, 2013; hereinafter the same) refers to the active and passive act that could affect the decision-making on granting of subsidies by deceptive means or other means deemed unfair by social norms, although it is not possible to receive subsidies through normal procedures (see, e.g., Supreme Court Decisions 2006Do8870, Dec. 27, 2007; 2011Du30182, Dec. 27, 2012).

2. Article 36 of the former Enforcement Decree of the Infant Care Act (amended by Presidential Decree No. 24904, Dec. 4, 2013; hereinafter the same shall apply) provides that “the State or a local government shall subsidize all or part of the expenses incurred in relation to the establishment of child care centers under Article 10, personnel expenses of infant care teachers (including substitute teachers), operation expenses of infant care centers (including substitute teachers), establishment and operation of local infant care information centers, promotion of welfare of infant care teachers and staff, provision of vulnerable infant care, etc.” Article 24(1) of the former Enforcement Decree of the Infant Care Act (amended by Presidential Decree No. 24904, Dec. 4, 2013; hereinafter the same shall apply) provides that “the State or a local government shall subsidize all or part of the following expenses within budgetary limits,” and provides that “the expenses to be subsidized shall be determined by the Minister of Health and Welfare or the head of the local government concerned as necessary for the operation of child care centers, etc.” (Article 6).

Accordingly, “Guidance on Child Care Services in 2012” issued by the Minister of Health and Welfare provides that personnel expenses shall be paid to a person operating a government-funded child care center according to “standards for the provision of personnel expenses of child care staff in 2012,” and the government shall provide basic infant care fees to children aged between 0 and 2, or disabled children (including disabled children-dedicated child care centers that do not receive personnel expenses) among government-funded child care centers, excluding government-funded child care centers that receive personnel expenses subsidies for infant care teachers and staff members, and the government shall provide support for basic infant care fees. As such, the government shall provide that “compliance with infant care fees and necessary expenses limits publicly announced by the Mayor/Do Governor”, “compliance with the total number of teachers and teachers and children’s percentage”, “non-facilities whose operation is suspended due to laws and regulations and guidance” and

Meanwhile, “Guidance on Child Care Business in 2012” only prescribes that the specific amount of the basic infant care fees to be paid to a child care center shall be determined according to the number of children with the financial resources of the child care center and the number of days present at the child care center, and there is no provision on the accounting report related to the payment of the basic infant care fees. In addition, unlike other support requirements, there is no provision that the amount of the basic infant care fees shall be recovered in cases where they violate the support requirements or receive the basic

In light of the language, purport, etc. of the relevant provisions, it appears that the financial accounting rules referred to as the “financial accounting rules of the childcare center” attached to the “financial accounting rules of the childcare center in 2012” appear to mean the “financial accounting rules of the childcare center.” It is difficult to view that the matters necessary for the financial and accounting of the childcare center are determined and included as a matter of course within the scope delegated by Article 24 of the former Enforcement Decree of the Infant Care Act. The contents of the provisions are merely the general standards for the financial accounting of the childcare center, and they are not directly related to the contents and quality of the childcare service. ② The former Infant Care Act, the Enforcement Decree of the Infant Care Act and the “2012 Child Care Business Guidance” do not have any provisions concerning the procedures for verifying the authenticity of the financial accounting report related to the “financial accounting report under the financial accounting rules”, and actually, the “financial accounting report of the childcare center in 2012” should be deemed as the “financial accounting report in the process of the implementation of the accounting report for the childcare service fee.”

Therefore, even if the operator of a child-care center conducts an accounting under the Financial Accounting Regulations with a false increase in expenditures in connection with the operation of the child-care center, and reported the result and received the basic infant-care fees, the circumstances that false involvement in the accounting report can not be deemed to have influenced the decision-making on the payment of the basic infant-care fees, and thus, it cannot be deemed that such act constitutes a crime of fraud under Article 347(1) of the Criminal Act.

3. The lower court found the Defendant guilty of the violation of the Infant Care Act, on the grounds indicated in its reasoning, including the following: “The Defendant, while operating the child care center of this case, entered the accounting report for an application for the payment of basic child care fees by accessing the integrated child care information system on April 2012, in an amount equal to twice the actual amount of food materials paid in March 2012, and then received the basic child care fees for April 2012, and then received the basic child care fees from July 2012 by receiving the basic child care fees of KRW 18,709,250 on a total amount of four occasions in the same manner until July 2012.”

4. However, in light of the aforementioned legal principles, even if the Defendant made an accounting report by falsely increasing the expenditure of food materials and making an accounting report, it cannot be readily concluded that the requirements for supporting basic childcare fees were not satisfied. Therefore, the mere fact that the Defendant received basic childcare fees after such an accounting report does not constitute “the case of receiving subsidies by false or other unlawful means” and thus, it cannot be deemed that the crime of fraud under Article 54(2) of the former Infant Care Act is established, and it cannot be deemed that the crime of fraud under Article 347(1) of the Criminal Act is established.

Nevertheless, the lower court found all of the facts charged in this case guilty on different premise. In so doing, the lower court erred by misapprehending the legal doctrine on the interpretation and application of “the act of receiving subsidies by false or other unlawful means” as provided by Article 54(2) of the former Infant Care Act and the legal doctrine on the elements of fraud, etc., which affected the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

5. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)