Defendant 1 and three others

Prosecutor

He/she shall file a prosecution (prosecution), Kim Sung-il (Trial)

Law Firm Sejong, et al.

Seoul Central District Court Decision 2011Gohap1552 Decided November 30, 2012

The part of the judgment of the court below regarding the Defendants’ violation of the Defense Acquisition Program Act shall be reversed.

Defendant 1 shall be punished by a fine of KRW 5,00,000, by a fine of KRW 3,000,000, by a fine of KRW 3,000,000, by a fine of KRW 1,00,000, by a fine of KRW 3,000, by a fine of KRW 40.

When Defendant 1, Defendant 2, and Defendant 3 fail to pay the above fine, the above Defendants shall be confined in a workhouse for a period calculated by converting 50,000 won into one day.

To order the Defendants to pay the amount equivalent to the above fine.

The prosecutor's remaining appeal is dismissed.

1. Summary of grounds for appeal;

Defendant 1, Defendant 2, and Defendant 3 were well aware of the circumstances and submitted false cost data, and thereafter received the purchase price pursuant to the supply contract concluded thereafter, and the lower court’s judgment, based on innocence, can be recognized as having committed a crime regarding the criminal intent by deceit and the violation of the Defense Acquisition Program Act, in full view of the fact that “the fact that property damage occurred by the Defense Acquisition Program Administration, the injured party,” and the circumstances where the Defendants were submitted false cost data, etc. However, the lower court erred by misapprehending the legal doctrine or misapprehending the legal doctrine.

2. Judgment on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud)

The court below found the Defendants not guilty of this part, taking into account the circumstances in which the Defendants submitted false cost data, the process of concluding supply contracts, etc., or of not recognizing the occurrence of damage by the Defense Acquisition Program Administration.

Examining the crime of fraud is established by deceiving another person to receive property or acquiring pecuniary benefits from the defective intent due to the deception. The essence of fraud is to acquire property or pecuniary benefits from deception, thereby infringing on the other party’s property. Therefore, it does not require that the other party actually suffers economic loss (see Supreme Court Decision 2010Do12928, Dec. 9, 2010, etc.).

Therefore, although the court below erred by misapprehending the legal principles on the grounds of innocence that “the occurrence of damages by the Defense Acquisition Program Administration” cannot be recognized, it cannot be readily concluded that the defendants intentionally submitted false cost data to obtain property or property gains or obtained property gains, as shown in the grounds for appeal presented by the court below, in comparison with the evidence duly adopted and examined by the court below.

Ultimately, the judgment of the court below is justified in its conclusion, and this part of the prosecutor's allegation is without merit.

3. Determination of violation of the Defense Acquisition Program Act

A. Summary of the facts charged and judgment of the court below

(1) Summary of the facts charged

(A) Defendants 1, 2, and 3

Defendant 4 Co., Ltd. (hereinafter “Defendant 4 Co., Ltd.”) is a corporation established for the purpose of the manufacture, sale, etc. of telecommunications tools and cables. Around May 1995, Defendant 4 was designated as a defense industry company (hereinafter “defense industry company”) with respect to the mutual currency sets (on the electric car and the telephone equipment inside the front car) and then supplied to the Defense Acquisition Program Administration more than 1,000 paper, such as VIC-7K, VIC-9K, VICR-15K (hereinafter “defense materials”) and 1,000 paper, such as the assembly of the instant cable.

Defendant 1 as the representative director of Defendant 4 company, and Defendant 2 as the vice president of Defendant 4 company, respectively, exercise overall control over all the affairs such as business, production, cost settlement, quality control, etc., including the Defense Acquisition Program Administration, from December 8, 2007 to April 30, 2010. Defendant 3 received instructions from Defendant 1, Defendant 2, or reported to Defendant 1 and Defendant 2, and was in charge of calculating the cost of defense materials supplied to the Defense Acquisition Program Administration.

Defendant 1, Defendant 2, and Defendant 3 conspired to conceal actual cost and submitted false cost data to the Defense Acquisition Program Administration to conclude the contract.

피고인 3은 2008. 7.경 방위사업청에 제출할 이 사건 케이블 조립체 품목에 대한 원가자료를 작성하면서, 사실은 ‘열 수축링’ 부품을 개당 18,960원에 샀을 뿐만 아니라 위 품목에 대해서는 외주가공할 생각이었는데도 마치 피고인 4 회사가 ‘열 수축링’ 부품을 개당 27,300원에 사 직접 제작할 것처럼 허위로 기재한 원가계산서 및 원자재수불부 등을 작성하여 피고인 1, 피고인 2의 결재를 받은 후, 그 무렵 서울 용산구 용산동 2가에 있는 방위사업청 원가 산정 담당 공무원에게 제출하였다. 이에 따라 방위사업청장은 2008. 8. 8. 산정원가 47,759,502원을 근거로 피고인 4 회사와 이 사건 케이블 조립체에 관한 계약금액을 47,276,712원으로 합의하여 공급계약을 체결하였으며, 그 무렵 피고인 4 회사에 계약금액 47,276,712원을 지급하였다.

On July 2008, the above Defendants conspired and submitted to the Administrator of the Defense Acquisition Program Administration for a false cost invoice, raw material receipts and disbursements, etc., and concluded a supply contract thereon, including entering into a supply contract, and submitted false cost data, as stated in Appendix II in the judgment of the court below, to the Administrator of the Defense Acquisition Program Administration.

(B) Defendant 4 Company

Defendant 4 Company was a corporation established for the purpose of manufacturing and selling KONEX and cables for communications, and Defendant 1, the representative of Defendant 4 Company, Defendant 2, and Defendant 3, the employer of Defendant 4 Company, committed the same offense as that of the foregoing paragraph in relation to the business of Defendant 4 Company.

(2) Judgment of the court below

The court below found Defendant 4 not guilty of this part of the facts charged on the ground that it is difficult to view that Defendant 1, Defendant 2, and Defendant 3 intentionally submitted false cost data, rather than the genuine cost data that the contract price is determined as it is, but not the reference material that is, the material that Defendant 4 submitted.

(b) recognized facts and relevant regulations;

(1) Around May 1995, Defendant 4, who was designated as a defense contractor, manufactured the cable assembly of this case, which connects mancom and mancom, defense materials.

(2) From 2000, Defendant 4 completed research and development with approval from the former Ministry of National Defense headquarters (or the Defense Acquisition Program Administration) with respect to major parts used for the assembly of the instant cables.

(3) Relevant provisions

(A) According to the former Enforcement Decree of the Act on Contracts to Which the State is a Party (amended by Presidential Decree No. 21698, Nov. 20, 2009; hereinafter the same), where the Administrator of the Defense Acquisition Program Administration purchases defense materials from defense contractors [Article 26(1)6(c)], and where he/she purchases military standard materials from a research and development enterprise, he/she may enter into a negotiated contract [Article 26(1)7(h)].

(B) The Administrator of the Defense Acquisition Program Administration, when concluding a contract for the procurement of defense materials or military specification materials, shall request the production company to submit cost data to determine the projected price in case of new development goods or special specifications materials with no reasonable transaction prices, and review the said materials after receiving them from the production company, or shall prepare a cost statement and determine the cost (Article 9 of the former Enforcement Decree of the Act on Contracts to Which the State Is a Party).

(C) The cost of defense materials, etc. consists of the amount calculated by converting the goods and services consumed for the manufacture or research of defense materials into monetary value, namely, material cost, labor cost, expenses, general management cost, and profits. Among them, material cost, labor cost, and expenses, which are direct manufacturing cost, are divided into direct and direct material cost, direct labor cost, direct labor cost, and indirect cost, which are indirect manufacturing cost. If direct labor cost is determined based on the public demand per unit and direct labor cost, the cost of the defense materials, etc. shall be calculated on an automatic basis in proportion to a certain ratio of cost, profits, etc. (amended by Ordinance of the Ministry of National Defense No. 161 of May 9, 2011; hereinafter the same shall apply). The former Rules on Calculation of Cost of Defense Materials (amended by Ordinance of the Ministry of National Defense No. 737, May 7, 2011; hereinafter the same shall apply)

(4) Conclusion of a supply contract for the instant cable assembly

(A) The Administrator of the Defense Acquisition Program Administration entered into a general final contract with Defendant 4 in the form of a negotiated contract with Defendant 4 over four times from August 8, 2008 to July 15, 2009, on the grounds that the cable assembly of this case constitutes goods eligible to enter into a negotiated contract pursuant to Article 26(1)6(c) or 26(1)7(h) of the former Act on Contracts to Which the State is a Party. However, in the case of cable assembly of this case, the Administrator of the Defense Acquisition Program Administration demanded Defendant 4 to submit the cost data on the grounds that the cable assembly of this case constitutes a new development product or special standard product with no reasonable transaction price pursuant to Article 9 of the former Enforcement Decree of the Act on Contracts to which the State is a Party.

(B) However, Defendant 1, Defendant 2, and Defendant 3 submitted cost data to the Defense Acquisition Program Administration, and submitted related data, such as material costs and labor costs, different from the actual ones, such as submitting false evidence as stated in the Annex II of the Crimes List II (A) as indicated in the judgment below, to the Administrator of the Defense Acquisition Program Administration.

(C) The Defense Acquisition Program Administration, on the ground that there was no evidence of direct labor cost related to the instant cable assembly submitted by Defendant 4, and that some of the material cost of the parts was submitted at an abnormal level, determined the estimated price by applying the adequate unit price for air demand (public demand applied at the time of conclusion of the contract in the preceding year) and parts of the previous year, as indicated in the attached Table II “C” and “C” as indicated in the judgment of the lower court, the Defense Acquisition Program Administration newly calculated the cost and then again determined the estimated price by subtracting 3% from the calculated cost. Furthermore, the Administrator of the Defense Acquisition Program Administration concluded a supply contract in accordance with the method of prior confirmation with Defendant 4. As a result, the supply contract was concluded at a price below 20% of the cost data submitted by Defendant 4.

(라) 한편 피고인 4 회사는 방위사업청장과 공급계약을 체결하면서 ‘피고인 4 회사가 허위의 증빙자료를 제출할 때에는 방위사업청장은 적정하다고 판단한 부당이득금과 그 상당의 가산금을 환수할 수 있다’고 약정하였다(물품구매 계약특수조건 제26조).

C. Judgment of the appellate court

(1) Issues

The key issue of the instant case is ① content and criminal intent of the crime of violating Article 48(1)12 of the former Defense Acquisition Program Act (amended by Act No. 11690, Mar. 23, 2013; hereinafter the same applies); ② scope of “original data” prohibited from being submitted pursuant to the said provision; ③ whether the cost data on the instant cable assembly constitutes the cost data subject to punishment under the said provision.

(2) Details and intent of a crime of violation of Article 48(1)12 of the former Defense Acquisition Program Act

Article 62(4)3 of the Defense Acquisition Program Act provides, “A person who commits an act prescribed in Article 48(1)12 shall be punished by imprisonment with or without prison labor for not more than three years or by a fine not exceeding ten million won,” and Article 48(1)12 of the former Defense Acquisition Program Act stipulates, “When a contract for supply is concluded by submitting false or other unlawful cost data to the Government” as one of the grounds for cancelling the designation of a defense contractor by the Minister of Knowledge Economy.

① In light of the fact that the former Defense Acquisition Program Act is based on the transparency, speciality, and efficiency of defense business (Article 2); ② The former Defense Acquisition Program Act has several provisions to realize the transparency and specialization of the execution of defense business (Articles 5 through 10); and the former Defense Acquisition Program Act has several provisions to designate a manufacturer as a defense contractor by allowing the designation of materials necessary for the rational support and development of the defense industry; and there are various provisions to support defense contractors (Articles 33 through 45). In full view of the fact that Article 48(1)12 of the former Defense Acquisition Program Act has several provisions to ensure the accuracy of cost data submitted by the defense contractor and to ensure transparency and fairness in the conclusion of contracts on munitions, etc.

Therefore, the purpose of punishing a person who submitted false original data for the violation of the above provision is to obtain unjust profits or to actually create such profits (see Supreme Court Decision 2012Do2404, Jun. 14, 2012). Moreover, the supply contract should not be concluded in accordance with the false cost data submitted by the industry.

Ultimately, inasmuch as the Defendants caused the risk of concluding a supply contract at an unreasonable price by submitting false cost data, even if the Defense Acquisition Program Administration calculated the cost deemed reasonable in the process of examining it and concluded a supply contract with a defense contractor, it is reasonable to view that the said provision may be punished for violation of the said provision. Furthermore, if the Defendants knew that the cost data submitted by the Defendants were false, intent as to the violation of the Defense Acquisition Program Act can be acknowledged.

(3) Scope of “false cost data” prohibited from being submitted

(A) Relevant provisions

(1) Where the Administrator of the Defense Acquisition Program Administration conducts the research and development of weapons systems or core technology pursuant to the provisions of Article 17 (3) of the former Defense Acquisition Program Act, he/she may allow defense contractors, general enterprises, specialized research institutes, or general research institutes to conduct research or manufacture of prototypes by determining the items, methods and scale of research or prototypes, and other necessary matters. (8) Matters necessary for the procedures, etc. for research and development of weapons systems and core technology shall be prescribed by Ordinance of the Ministry of National Defense. (1) The value of materials prescribed by Presidential Decree as defense materials may be designated as those not classified as weapons systems:

(B) Determination

살펴보면 ① 구 방위사업법 제48조 제1항 제12호 는 제출이 금지되는 ‘원가자료’를 방산물자로 한정하지 않는 점, ② 방위사업청장이 ‘방산물자’뿐만 아니라 구 국가를 당사자로 하는 계약에 관한 법률 시행령 제9조 , 제26조 제1항 제6호 (다)목 , 제26조 제1항 제7호 (아)목 에 의하여 방산업체로부터 군수품에 관한 원가자료를 제출받아 이를 기초로 원가를 산정하여 공급계약을 체결하는 경우에도, 구 방위사업법의 취지에 따라 계약 체결의 투명성과 공정성은 보호되어야 하는 점, ③ 특히 위 관련 규정에서 보는 바와 같이 구 방위사업법 등이 ‘ 구 방위사업법 제18조 제4항 에서 정하고 있는 연구 또는 시제품’(이하 ‘연구·시제품’이라 한다)에 관하여 방산물자와 같은 내용의 계약 특례와 원가계산기준 등을 정하고 있는 점을 종합하면, 방산업체가 연구·시제품에 관하여 구 국가를 당사자로 하는 계약에 관한 법률 시행령 제9조 , 제26조 제1항 제6호 (다)목 , 제26조 제1항 제7호 (아)목 에 따라 방위사업청장과 공급계약을 체결하면서 허위의 원가자료를 제출하였다면 구 방위사업법 제48조 제1항 제12호 의 처벌 대상이 된다.

(4) In the instant case

(A) Research and pilot products-related provisions

(1) Article 10 (Procedures, etc. for Research and Development) of the Enforcement Rules of the Defense Acquisition Program Act (amended by Presidential Decree No. 722, Oct. 12, 201); (1) Where the research and development of weapons systems pursuant to Article 18 of the Act cannot take the following stages because the manufacture of prototypes is difficult due to the characteristics of weapons systems, etc., the Minister of the Defense Acquisition Program Administration shall prepare guidelines for the development of new products; (2) Where the research and development of new products is conducted by the Minister of National Defense with the approval of the Minister of National Defense for the development of new products pursuant to the provisions of Article 3, the Minister of National Defense shall prepare guidelines for the development and development of new products; and (3) Where the Minister of National Defense provides for the development and development of new products, he/she shall notify the relevant research and development agency of the development of new products for the purpose of calculating the development of new products (where necessary, the Minister of National Defense shall establish new products for the development and development of new products).

(B) Determination

As seen earlier, since 200, Defendant 4 completed research and development with the approval of development from the former Ministry of National Defense headquarters or the Defense Acquisition Program Administration as “37 country inventory number domestically-developed development items” with respect to the main parts of the cable assembly of this case. In particular, as discussed in this case, Defendant 4 obtained the approval of development as “37 country inventory number domestically-developed development items” with respect to the main parts of the cable assembly of this case as “37 country inventory number domestic development items” on March 2000, and obtained the approval of development as “37 country inventory number domestic development items,” and obtained the confirmation of research and development on July 2005 as “37 country inventory number domestic development items,” and it is reasonable to view research and development as the basis for which the submission of domestic research materials constitutes “Article 39 of the former Enforcement Rule of the Act on Special Measures for Defense Industry,” Article 10(2)6(3) of the former Enforcement Rule of the Defense Acquisition Program Act, Article 10(4) of the former Framework Ordinance of the Defense Acquisition Program Act.

(5) Sub-committee

Ultimately, it is reasonable to view that Defendant 1, Defendant 2, and Defendant 3 conspired to conclude a contract for the supply of cable assembly of this case, which is a research and pilot product, pursuant to Articles 9, 26(1)6(c), and 26(1)7(h) of the former Enforcement Decree of the Act on Contracts to Which the State Is a Party, and submitted false cost data and concluded a supply contract. In addition, insofar as the above Defendants were aware of false circumstances, intent as to the violation of the Defense Acquisition Program Act is recognized. Therefore, the lower court’s judgment on a different premise is erroneous in the misapprehension of legal doctrine or misunderstanding of facts, and the prosecutor’s assertion pointing this out is with merit.

4. Conclusion

Therefore, since the prosecutor's appeal on the violation of the Defense Acquisition Program Act is well-grounded, the judgment of the court below is reversed in accordance with Article 364 (6) of the Criminal Procedure Act and it is decided as follows after the pleading. The prosecutor's appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) is groundless, and it is dismissed in accordance with

The descriptions referred to in paragraph (3) (1) shall be as follows.

1. Defendant 3’s partial statement in the eighth trial record of the lower court

1. Part of the statement made by the witness 1, 2, and 3 in the seventh trial record of the lower court

1. A copy of each purchase contract;

1. Defendant 4’s actual purchase, and the CD of actual sales ledger;

1. Investigation reports (the details of payment of the contract amount and accompanying documents of the disbursement resolution) and accompanying materials;

1. Notice of items designated as defense materials, and certificates of research and development;

1. Article applicable to criminal facts;

A. Defendant 1, Defendant 2, and Defendant 3: Article 62(4)3 of the Defense Acquisition Program Act; Article 48(1)12 of the former Defense Acquisition Program Act (amended by Act No. 9401, Jan. 30, 2009); Article 48(1)12 of the former Defense Acquisition Program Act; Article 48(1)12 of the former Defense Acquisition Program Act; Article 30 of the Criminal Act (elective of fines)

B. Defendant 4: Articles 63 and 62(4)3 of the Defense Acquisition Program Act; Article 48(1)12 of the former Defense Acquisition Program Act (amended by Act No. 9401, Jan. 30, 2009); Article 48(1)12 of the former Defense Acquisition Program Act; Article 48(1)2 of the former Defense Acquisition Program Act; Article 1(2) of the Criminal Act

1. Aggravation for concurrent crimes;

Article 37 (former part of Article 37, Article 38 (1) 2, and Article 50 of the Criminal Act (Aggravation of concurrent Crimes with Punishment in Crimes of Violation of Defense Acquisition Program Act, dated July 15, 2009, with the largest penalty)

1. Detention in a workhouse (Defendant 1, 2, and 3);

Articles 70 and 69(2) of the Criminal Act

1. Order of provisional payment;

Article 334(1) of the Criminal Procedure Act

Defendant 1, Defendant 2, and Defendant 3 submitted false cost data, thereby impairing the transparency and fairness in concluding a supply contract for munitions, etc., and the period and frequency thereof are considerable, etc. that are disadvantageous to the Defendants; Defendant 4 supplied goods at a price lower than the import price by success in research and development by manufacturing methods in Korea; and at the time, it was difficult for the Defense Acquisition Program Administration to input some items into the cost data processing system, etc.; the cost calculation practices of the Defense Acquisition Program Administration; the cost data submitted by Defendant 4 and the cost data submitted by the Defense Acquisition Program Administration; and the supply contract was concluded with Defendant 20% or more from the cost data submitted by Defendant 4, including the motive and process of the crime; the method and consequence of the crime; and the circumstances after the crime, etc.

Judges Kim Jong-ju (Presiding Judge)

1) Although the Defendants’ crime of this part (from August 8, 2008 to July 15, 2009) was partially amended, there is no big difference in the contents. Thus, the Defendants’ explanation on the relevant Acts and subordinate statutes as of July 15, 2009, and the “application of the statutes” to be seen subsequent to the crime ought to be written on each date and time.

2) If a limited interpretation is made as in the holding of the lower court, the Defense Acquisition Program Administration may punish a defense contractor as a breach of the above provision if it faithfully examines the cost data submitted by the defense contractor and concludes a supply contract as it is. However, it may lead to unreasonable results that the said provision cannot be punished for a violation of the above provision if it faithfully examines the case and finds false facts and concludes a supply contract at lower

주3) 원심은 피고인들이 제출한 원가자료가 참고자료에 불과하다고 하였으나, ① 방위사업청장이 구 국가를 당사자로 하는 계약에 관한 법률 시행령에 따라 피고인 4 회사 제출의 원가자료를 기초로 적정하다고 판단되는 원가를 산정한 후 공급계약을 체결하는 과정, ② 피고인 4 회사가 방위사업청장과 공급계약을 체결하면서 허위의 원가계산자료를 제출하여 부당이득을 얻은 경우 이를 반환하기로 약정한 점(물품구매 계약특수조건 제26조), ③ 부당이득 환수에 관한 구 방위사업법 제58조의 내용 등을 종합하면, 이를 참고자료로 볼 수는 없다.