[1] The meaning of "Fraud or other unlawful act" in the crime of tax evasion under Article 9 (1) of the former Punishment of Tax Evaders Act

[2] In a case where a representative director of the company made a large amount of donation to a third party with the company's assets, the requirements to constitute an act of occupational breach of trust, and whether the representative director should be viewed differently in a case where there are circumstances such as the actual

[3] Whether the intent of unlawful acquisition can be recognized even if the person who committed the embezzlement subsequently returns, compensates for, or preserves the embezzled property (affirmative), and whether the circumstance where the person who committed the embezzlement had a separate monetary claim against the owner of the goods affects the crime of occupational embezzlement already established (negative in principle)

[1] Article 9(1) (see current Article 3(1) and (6) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010) / [2] Articles 355(2) and 356 of the Criminal Act / [3] Articles 355(1) and 356 of the Criminal Act

[1] Supreme Court Decision 2001Do3797 Decided February 14, 2003 (Gong2003Sang, 871) Supreme Court Decision 2010Do1345 Decided March 24, 201 (Gong2011Sang, 882) Supreme Court Decision 201Do13605 Decided March 15, 2012 / [2] Supreme Court en banc Decision 83Do2330 Decided December 13, 1983 (Gong1984, 227), Supreme Court Decision 2005Do635 decided March 10, 201, Supreme Court Decision 2008Do6345 decided March 24, 201 (Gong2011Sang, 205Do63965 decided March 16, 205) / [309Do9469 decided March 16, 2015]

Defendant 1 and one other

Defendants and Prosecutor

Law Firm Barun, Attorneys Cho Il-il et al.

Seoul High Court Decision 2010No468 decided July 16, 2010

The part of the lower judgment against Defendant 2 is reversed, and that part of the case is remanded to the Seoul High Court. Defendant 1’s appeal is dismissed.

The grounds of appeal are examined.

1. As to the Prosecutor’s Grounds of Appeal

A. As to the misapprehension of legal principles as to "Fraud or other unlawful act" which is an element of the crime of tax evasion

(1) In the crime of tax evasion under Article 9(1) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 919, Jan. 1, 2010; hereinafter the same shall apply), the term “Fraud or other unlawful act” means an act which makes it possible to evade taxes and which is recognized as unlawful by social norms, i.e., a deceptive scheme which makes the imposition and collection of taxes impossible or considerably difficult. Therefore, it does not constitute mere failure to file a tax return or making a false tax return without accompanying other acts, but it does not constitute the act of making it impossible or considerably difficult to impose and collect taxes, in addition to the circumstances where active intent to conceal, such as the failure to file a tax return or underreporting, and intentionally failing to enter revenues or sales, etc. in the account book, it may be recognized as making it impossible or remarkably difficult (see, e.g., Supreme Court Decisions 2001Do3797, Feb. 14, 2003; 2015Do3615, Mar. 15, 2015).

(2) According to the reasoning of the lower judgment and the record, Defendant 2, as the representative director of Nonindicted Company 1, entered into a trade agreement with Nonindicted Company 2 on or around June 30, 200 on the business of Russia weapons systems and equipment supplied to the Republic of Korea. Defendant 2, as well as Nonindicted Company 1, who was engaged in the activities for transferring Russia Export Business to the Republic of Korea during the second period from 200 to 206 with Nonindicted Company 1, who did not know of the current number of Non-Indicted Company 200 million U.S. dollars (MTIS-M), and did not receive a false entry fee of approximately 31,000 U.S. dollars (MUREN) from Non-Indicted Company 2 with Non-Indicted Company 30,000,000,000 U.S. corporation’s account transfer fee of Non-Indicted Company 1, 200,000 won, and did not receive a false entry fee of Defendant 1 and Non-Indicted 2.4.

(3) We examine the above facts in light of the legal principles as seen earlier.

As above, Defendant 2 agreed with Nonindicted 1, a partner, not to conduct accounting for the prevention of grasping from the outside of the revenue of the arms brokerage commission to be received by the Russia exporter. The act of receiving the said weapons brokerage commission through the accounts opened under the joint names of Defendants 2 and 2 in the United States, and Nonindicted Company 2 after disguised the transaction of the said weapons brokerage business, etc., Defendant 2, a partner, committed an act of receiving the said weapons brokerage commission through the accounts opened under the names of Nonindicted Company 2 in the United States, and reported Defendant 1’s income for the business year 2004 on the basis of the false book omitting the said revenue. Such an act by Defendant 2 does not only constitute a simple non-declaration or underreporting of taxable objects but also a disguised act such as transaction name and use of the overseas account to prevent the external exposure of the revenue of the weapons brokerage commission, and fraud or other unlawful act that significantly makes it difficult to impose and collect taxes.

Defendant 2 committed the above act because it is revealed that Defendant 2 acted as a business for the transfer of Russia weapons exporters and that the receipt of the weapons brokerage commission from such weapons exporters is anticipated if it is externally revealed, and there is a concern that such act may obstruct the future activities as transfer sets, it is clear that the above act was done under the intent of Defendant 1 to make it difficult to grasp the income of Defendant 1 corporation from the outside including the tax authorities, and thereby, it is inevitable that the imposition and collection of taxes would be considerably difficult, and as long as the above result actually occurred, it does not interfere with deeming that the above subjective motive or circumstance occurred to constitute fraud or other unlawful act.

(4) Nevertheless, the lower court found Defendant 2 not guilty of the violation of the Punishment of Tax Evaders Act due to Defendant 2’s tax evasion for the business year of 2004, on the ground that, even if Defendant 2 omitted business income equivalent to the above fees in filing a return of tax base and tax amount for the business year of 2004, it was merely a failure to file a return under tax law or underreporting, and that there was a disguised circumstance that Defendant 2 received the weapons brokerage commission due to the second non-indicted 2, a corporation in the United States, as the name of the business in Vietnam, not a concealment of income, but a disguised act to realize the profits of weapons brokerage commission, and thus, it cannot be deemed as a fraud or other unlawful act that significantly makes it difficult to impose and collect taxes.

The judgment of the court below is erroneous in the misapprehension of legal principles as to "Fraud and other unlawful acts" under Article 9 (1) of the former Punishment of Tax Evaders Act, which affected the conclusion of the judgment. The ground of appeal assigning this error is with merit.

B. As to the assertion of misapprehension of legal principles as to occupational embezzlement

Examining the reasoning of the judgment below in light of the relevant evidence, it is just that the court below found Defendant 2 not guilty on the grounds that there is no evidence to prove the facts charged that Defendant 1 embezzled the funds of the victim corporation as stated in Nos. 1 and 5 of the judgment of the court below [No. 3]. There is no illegality in violation of the principle of free evaluation of evidence against the law of logic and experience as otherwise alleged in the ground of appeal.

2. As to the Defendants’ grounds of appeal

A. As to the first ground for appeal

Examining the reasoning of the lower judgment in light of the evidence duly admitted by the lower court, it is justifiable to acknowledge that the lower court evaded each corporate tax of Defendant 1 corporation 2005 through 2008 on the ground that Defendant 2’s act of hiding active income, such as false transactional names, false use of overseas accounts, donation of arms brokerage commission using the U.S. corporation’s account to prevent the disclosure of the revenue, and inflow of arms brokerage commission through the use of domestic accounts, and false entry of books omitted the revenue, thereby evading corporate tax of each of the business years of 2005 through 208.

As alleged in the ground of appeal, the lower court did not err by misapprehending the legal doctrine as to the “Fraud or other unlawful act” as provided by Article 9(1) of the former Punishment of Tax Evaders Act. The Supreme Court Decision cited in the ground of appeal is different from this case, and it is inappropriate to invoke this case.

B. Regarding ground of appeal No. 2

(1) In a case where a representative director of a company with poor financial structure made a large amount of contribution to a third party with assets, he/she lacks reasonableness as excessive amount of contribution exceeding the company's social role in view of the company's financial status, such as omitting debts or making it difficult to repay debts. In particular, if the other party to the contribution has a personal relationship with the representative director, and there is little relationship with the company, the contribution constitutes an act that violates the company's duty as a good manager. The same applies to the case where the representative director is a shareholder with actual one (see, e.g., Supreme Court en banc Decision 83Do230, Dec. 13, 1983; Supreme Court Decisions 2005Do946, Jun. 10, 2005; 2008Do6335, Mar. 10, 2011).

(2) Examining the reasoning of the lower judgment in light of the aforementioned legal principles and the evidence duly admitted by the lower court, the lower court is justifiable to have determined to the effect that Defendant 2’s act of remitting USD 7,954,746 to the account of ○○○○ church for the purpose of donation, thereby having Defendant 1 take account of the following circumstances: (a) the size of the donation in this case; (b) the financial status of Defendant 1 corporation at the time of the donation in this case; (c) the amount of the financial assets; (d) the amount of the capital and sales and net income; and (e) the amount of the donation in this case last used for paying personal debts to Defendant 2.

The court below did not err in the misapprehension of legal principles as to occupational violation and the principle of free evaluation of evidence against logical and empirical rules as otherwise alleged in the ground of appeal. In this regard, the Supreme Court precedents cited in the ground of appeal are different from this case, and it is inappropriate to invoke this case.

C. Regarding ground of appeal No. 3

(1) In the crime of occupational embezzlement, the expression of intent of unlawful acquisition in the crime of occupational embezzlement refers to the intent to dispose of the property of another person in violation of his/her duties, such as his/her own property, for the purpose of pursuing his/her own interest or a third party, and even if there is an intention to return, compensate, or preserve it later, it does not interfere with recognizing it. In addition, the crime of occupational embezzlement is established when the intent of unlawful acquisition was explicitly expressed externally. Thus, even if a person who committed the crime of occupational embezzlement has a separate monetary claim against the owner of the goods, such circumstance alone does not affect the crime of occupational embezzlement already established, unless there are special circumstances, such as the settlement prior to the crime of embezzlement was made (see, e.g., Supreme Court Decisions 95Do59, Mar. 14, 1995; 2005Do3431, Jun. 22, 2006).

(2) The court below acknowledged that Defendant 2 had an intent to illegally acquire and dispose of KRW 4,510,200,000, out of the funds owned by Defendant 1 corporation as if they were owned by Defendant 1 corporation and used them for personal purposes, such as lending 4,510,200,000 among them to ○○○○ church or purchasing real estate under the name of Defendant 3 in his own name, and the above Defendant deposited the funds repaid from the above church into the account of Defendant 1 corporation, and used them for the above Defendant’s personal purposes as if the funds of the above Defendant were deposited in the account of Defendant 1 corporation, as if the funds of the above Defendant were deposited in the account of Defendant 1 corporation, the above Defendant used them for the above Defendant’s personal purposes. Furthermore, the court below determined that the above Defendant had no influence on the establishment of the crime of occupational embezzlement.

(3) Examining the foregoing legal principles and the evidence duly admitted by the court below, the above judgment of the court below is just and acceptable. Even if Defendant 2 paid USD 1.5 million to Nonindicted Co. 1 at the time of the crime of occupational embezzlement, thereby having a claim for reimbursement equivalent to the same amount against the Defendant 1 corporation, such circumstance alone does not obstruct the recognition that the above Defendant embezzled KRW 4,510,200,000, which the Defendant was under custody for the Defendant 1 corporation, with the intent of unlawful acquisition.

As alleged in the ground of appeal, the court below did not err in the misapprehension of legal principles as to unlawful acquisition and intent, or in violation of the principle of free evaluation of evidence.

3. Scope of reversal

For the above reasons, the part of the judgment of the court below as to Defendant 2's acquittal of the violation of the Punishment of Tax Evaders Act due to the tax evasion for the business year 2004 for the defendant 2 should be reversed. The remaining part of the judgment of the court below which the court below found the defendant guilty should be reversed since one sentence should be imposed in relation to concurrent crimes under the former part of Article 37 of the Criminal Act with the above reversal and the above reversal. In addition, the part which the court below found the defendant guilty as the reasons should be reversed in relation to the above defendant's violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes

4. Conclusion

Therefore, the part of the lower judgment against Defendant 2 is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. Defendant 1’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ahn Dai-hee (Presiding Justice)