Defendant 1 and one other

Prosecutor

Maximum Disaster:

Attorney Na Sung-tae

Seoul Eastern District Court Decision 2008 High Court Decision 3157 Decided July 15, 2009

Of the judgment of the court below, the part concerning the use of subsidies for other purposes is reversed.

Defendants shall be punished by a fine of KRW 1,000,000.

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

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

The prosecutor's remaining appeal is dismissed.

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

A. Summary of the facts charged

Defendant 1 is Defendant 2’s person working as the secretary general, and Defendant 2’s association (hereinafter “Association”) is a non-profit incorporated association established for the purpose of rationalizing advertising transactions by investigating the size of inmates in advertising media, including newspapers.

1) Defendant 1

(a)use of subsidies for purposes other than purposes;

The above Association shall not use 420,000,000 won in total with subsidies under the name of the Cit Bank account (Account No. 1 omitted) in the name of the above Association on October 13, 2006 and on November 27, 2006, in the name of the consignment project related to the verification project (the period from October 9, 2006 to July 31, 2007) such as publication copies, etc. in daily newspapers for the fiscal year, which was implemented by the Newspaper Development Committee as a support project by the Newspaper Development Committee, for any purpose other than the purpose of the verification project of the issuance copies of daily newspapers for the fiscal year, with the care of a good manager.

Nevertheless, on January 5, 2007, the Defendant deposited KRW 2,230,00 in the Association Managing Director Non-Party 1’s passbook as equipment for the above verification business, and was returned on January 8, 2007 to the National Bank passbook (Account Number 2 omitted) in the name of the Defendant and used as operating expenses for the Association employees.

In addition, from January 5, 2007 to July 30, 2007, the Defendant used 54,228,900 won for purposes other than the purpose of subsidies, such as using it as operating expenses of the said Association office, as if it were paid as the withdrawal equipment as above, as shown in the attached list of crimes.

(b) false reports;

After completing the incidental verification business entrusted by the Newspaper Development Committee, the Defendant, as seen in the foregoing paragraph (a) around August 2007, submitted a false report to the person in charge of the Press Center 1801, Jung-gu, Seoul Special Metropolitan City on August 23, 2007, after receiving the internal settlement of Nonindicted 2, who is the vice-chairperson of the above Association, and submitted the false report to the person in charge of the Press Development Committee 1801, located in Jung-gu, Seoul Special Metropolitan City on the press room 25, to make a false report.

2) Defendant 2’s incorporated association

Defendant 1, who is an employee of the foregoing Association at the same time, committed an offense as above.

B. The judgment of the court below

The court below found Defendant 2’s association (hereinafter “Defendant Association”) not guilty of the facts charged of this case on the ground that there is no proof of a crime, and found Defendant 2 not guilty of the facts charged of this case on the following grounds: (a) the Subsidy Act imposes strict restrictions on the budget compilation, use of subsidies, etc. under the Subsidy Act; (b) even based on all evidence duly adopted and investigated by this court upon the prosecutor’s application, the aforementioned amount from the newspaper development fund is merely the State Fund established under the Act on the Freedom of Newspapers, Etc. and the Reinforcement of their Functions, and it does not constitute a subsidy granted pursuant to the procedure.

2. Summary of grounds for appeal;

The Newspaper Development Committee is a government agency under the jurisdiction of the Ministry of Culture, Sports and Tourism to which the authority to operate the Newspaper Development Fund is delegated, and the amount paid by the said Newspaper Development Committee to the Defendant Association for verification projects, such as publication copies of daily newspapers, in accordance with the guidelines for formulating a budget bill and a fund operation plan in 2006, constitutes subsidies to which the Subsidy Act applies. Nevertheless, the lower court’s determination that the money paid to the Defendant Association is not a subsidy is erroneous by misapprehending the legal doctrine on

3. Determination

(a) Facts of recognition;

According to the records, the following facts are recognized.

1) Pursuant to Article 27 of the former Act on the Freedom of Newspapers, etc. and Guarantee of Their Functions (amended by Act No. 9974, Jan. 25, 2010; hereinafter “Examination Act”), the Newspaper Development Committee is a special purpose corporation established under the Ministry of Culture, Sports and Tourism in order to guarantee diversity of public opinions, support the promotion of the newspaper industry, and manage and operate the newspaper development fund. The Defendant Association is an incorporated association established to conduct an inspection on the number of copies and distribution of the media, which are its members, with membership fees paid from its funds and its members as its members and membership fees around 1989.

2) The Newspaper Development Committee shall carry out the business of verifying and disclosing the total number of copies published, the number of copies sold, the subscription income, and advertising income reported by newspaper business operators to the newspaper development committee under the Act on Newspapers. Of them, it may entrust the business of verification to the agencies that carry out the business of incidental construction, such as newspapers (Article 29 Subparag. 2, Article 16(3), and Article 38(3) of the Newspapers Act).

3) The Newspaper Development Committee received 25 billion won from the Government as the newspaper development fund in 2006. Of the above 25 billion won, the budget for KRW 500 million was allocated as a private ordinary subsidy for the projects to verify and disclose the above report.

4) The Newspaper Development Committee voluntarily performed the duties of “disclosure” among the projects for verification and disclosure of the above report, and decided to entrust the Defendant Association with the duties of “verification”, and concluded an entrustment contract with the Defendant Association on October 2006, after receiving an application for subsidies from the Defendant Association pursuant to the Guidelines for the Management of Subsidies from the Newspapers Development Fund Act, and upon receiving an application for subsidies of KRW 420 million, the Defendant Association made a decision to grant subsidies. The main contents of the instant entrustment contract are as follows.

o Entrusted duties: The total number of copies published, the price of goods for each daily newspaper, the number of copies published, the actual income of subscription, and the verification of advertisement income.

o Contract period: from October 9, 2006 to May 31, 2007 (after this end, until July 31, 2007)

o Contract Amount: 420 million won

o Duties of entrusted institution: The accused association shall observe the provisions of the Act on the Management and Operation of the Newspapers Development Fund and other relevant Acts and subordinate statutes and the Rules on the Management and Operation of the Fund and shall perform the entrusted duties in good faith.

o. Reversion of results: The results performed by the defendant association shall revert to the Newspaper Development Committee, and the defendant association shall not use the results without permission from the Newspaper Development Committee: Provided, That after the Newspaper Development Committee decides to disclose the matters to the public, the defendant association shall use the results of the member company, but in such cases, the Newspaper Development Committee and the defendant association shall consult with each other.

5) Meanwhile, the Defendant Association decided to appropriate the details approved by the Newspaper Development Committee, such as construction withdrawal equipment, expenses, incidental verification fees, and general management expenses, among the KRW 420,000,000, which were received as above, to return the remainder to the entire Newspaper Development Committee in accordance with the above Guidelines for the Management of Subsidies.

6) At the time of the instant case, Defendant 1 agreed with Nonindicted 3 and Nonindicted 4, the head of the management planning team at the time, at the time, who was acting as an agent for the head of the secretariat of the Defendant Association, that the money received from the Newspapers Development Committee should be returned without being used, as if he were paid money to the employees under the pretext of business trip expenses and performance-based bonuses, and that the said money was returned from the said employees and used as operating expenses of the Defendant Association. In order to manage the collected money by the said method, Defendant 1 opened a passbook in the name of Defendant 1.

7) Defendant 1, along with the above Nonindicted 3 and 4, prepared a false business trip list as if the employees who did not actually have any business trip as indicated in the facts charged, and prepared a false business trip list as if they were to pay performance rates to the employees. Defendant 1 deposited KRW 54,228,90, which was paid as performance rates and piece rates from the Newspaper Development Committee to the employees head of the Tong, but was returned to the Defendant Association’s members, etc., and used for the Defendant Association’s member gift expenses, employee workshop expenses, etc.

8) The Defendant Association reported the monthly business performance and settlement details to the Newspaper Development Committee with Defendant 1’s approval each month. On July 2007, after the completion of the verification of the project, the Defendant Association prepared a final settlement report containing the details of the business trip expenses and performance rates that have been falsely accounted as above in accordance with the form of the settlement report of the subsidized project by the Newspaper Development Committee. The Defendant Association decided the approval of Defendant 1 who was on the leave at the time, and submitted it to the Newspaper Development Committee on August 23, 2007 with the approval of the vice-chairperson Nonindicted 2.

B. Determination as to whether the money received by the Defendant Association from the Newspaper Development Committee constitutes a subsidy or indirect subsidy

1) Article 2 subparag. 1 of the Subsidy Act provides that "subsidies" refers to subsidies, charges, or other benefits that are granted without receiving any corresponding consideration from the State for the purpose of creating or providing financial assistance to affairs or projects conducted by any person other than the State, as prescribed by Presidential Decree. Article 2 subparag. 4 of the Subsidy Act provides that "indirect subsidies" refers to benefits that are granted by any person other than the State without receiving any corresponding consideration from the State in whole or in part for the purpose of granting the subsidies.

2) Therefore, the subsidy under the Subsidy Act should be the money granted by the “State.” Although the Newspaper Development Committee is the subject that manages the newspaper development fund contributed by the Government, such circumstance alone cannot be viewed as a “State” under the Subsidy Act. Accordingly, the Prosecutor’s assertion that the subsidy in this case constitutes a subsidy not an indirect subsidy is rejected.

3) However, the following circumstances recognized by the above facts and relevant regulations, namely, ① the business that is subject to self-regulation by newspaper enterprisers, and the business that is subject to verification of the number of copies published in daily newspapers and the original revenue, etc.; ② the newspaper enterprisers have the nature of the original private business that the newspaper development committee allows them to carry out its business in order to support the rationalization of the market order due to the increase of prices among newspapers and readers and newspapers and unreasonable advertising prices; ② the Defendant association actually conducted its business with membership fees paid by its members after its establishment in 1989 and conducted its investigation of the number of copies published in newspapers, subscription revenue and advertising revenue, etc. (3) The newspaper development committee established the newspaper development committee’s budget to the Association established within the Ministry of Strategy and Finance as the result of its inspection of materials and its disclosure to the Association, which is the result of its disclosure of the newspaper’s budget, including the result of the examination’s inspection of materials and its disclosure of funds.

4) Therefore, the judgment of the court below which acquitted the Defendants on the premise that the money received from the Newspaper Development Committee does not constitute a subsidy or indirect subsidy is erroneous in the misapprehension of legal principles as to the definition of subsidy, which affected the conclusion of the judgment.

C. Determination as to false reports

However, Article 2 subparag. 3 and 6 of the Subsidy Act defines “a subsidy program operator” as “a subsidy program operator” and “a subsidy program operator” as “a subsidy program operator” and “a subsidy program operator” as “a subsidy program operator has completed the subsidy program as prescribed by the head of the central government agency, or when the fiscal year has expired, a report on the performance of the subsidy program shall be prepared and submitted to the head of the central government agency as prescribed by Article 42 subparag. 3, and Article 2 subparag. 7 of the Subsidy Act defines “the head of the central government agency” as “the head of the central government agency under Article 6 of the National Finance Act” and “a subsidy program operator shall be punished as provided by Article 42 subparag. 3, and Article 2 subparag. 7 of the Act defines as “the head of the central government agency under Article 6 of the National Finance Act.” In light of the language and structure of the above legal provision as well as the penal provision, it is clear that a subsidy program operator who is not a “indirect subsidy program operator” and shall not be punished by Article 27 subparag.

However, among the facts charged in the instant case, Defendant 1, the secretary general of the Defendant Association, prepared a false statement on the settlement of the subsidized project and the performance report and submitted them to the Newspaper Development Committee. In light of the aforementioned legal principles, the Defendants’ above act does not constitute a crime under Articles 42 subparag. 3 and 27(1) of the Act.

Ultimately, this part of the facts charged should have been pronounced not guilty in accordance with the former part of Article 325 of the Criminal Procedure Act.

3. Conclusion

Therefore, since the public prosecutor's appeal concerning the portion of subsidy used for the purpose other than the purpose of the subsidy is well-grounded, this part of the judgment below is reversed pursuant to Article 364 (6) of the Criminal Procedure Act, and the public prosecutor's appeal concerning the false report is without merit, and it is dismissed pursuant to Article 364 (4) of the Criminal Procedure Act.

Defendant 1 is Defendant 2’s person working as the secretary general, and Defendant 2’s association (hereinafter “Association”) is a non-profit incorporated association established for the purpose of rationalizing advertising transactions by investigating the size of inmates in advertising media, including newspapers.

1. Defendant 1

The above Association shall not use the amount as a good manager with the payment of 420,000,000 won for purposes other than the purpose of the verification business of the issuance number of copies of daily newspapers for the fiscal year (the period from October 9, 2006 to July 31, 2007) under the name of the consignment business expenses related to the verification business (the period from October 9, 2006 to July 31, 2007) conducted by the Newspaper Development Committee as a support business for the newspaper development committee.

Nevertheless, on January 5, 2007, the Defendant deposited KRW 2,230,00 in the Association Managing Director Non-Party 1’s passbook as equipment for the above verification business, and was returned on January 8, 2007 to the National Bank passbook (Account Number 2 omitted) in the name of the Defendant and used as operating expenses for the Association employees.

In addition, from January 5, 2007 to July 30, 2007, the Defendant used the indirect subsidy for purposes other than its original purpose, such as using KRW 54,228,900 as the office operating expenses of the above Association by using the amount of KRW 54,228,90 in the method of accounting and return to the Defendant as the head of the Tong after the accounting as stated in the attached list of crimes.

2. Defendant 2’s incorporated association

Defendant 1, who is an employee of the foregoing Association at the same time, committed an offense as above.

1. The defendants' partial statement in the original judgment and the trial court.

1. The statement made by Nonindicted 6 of the witness in the third trial record of the party trial;

1. Statement of the suspect interrogation protocol as to Defendant 1 prepared by the public prosecutor;

1. Statement of each protocol of interrogation of Nonindicted 3 and 4 prepared by the prosecutor

1. Statement made by the prosecutor on Nonindicted 7, 2, 6, and 8 of each written statement

1. Results of each inquiry into the Ministry of Strategy and Finance;

1. Each entry in a verification entrustment contract, a plan for the newspaper development fund business in 2006, the guidelines for the management of subsidies from the newspaper development fund, a business trip account book for construction works in 2006, and a fund operation file for the

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

A. Defendant 1: Articles 41 and 22(2) of the Act on the Budgeting and Management of Subsidies; selection of fines

(b) The incorporated association of Defendant 2: the main sentence of Article 8, Article 1(2) of the Criminal Act, Articles 43, 41, and 22(2) of the Act on the Budgeting and Management of Subsidies

1. Detention in a workhouse;

Defendant 1: Articles 70 and 69(2) of the Criminal Act

1. Order of provisional payment;

Article 334(1) of the Criminal Procedure Act

1. The defense counsel asserts that Article 14 of the Subsidy Act provides that “the State shall not appropriate any subsidy in the budget for any institution that has appropriated the contributions in the budget, other than the contributions.” As for the newspaper development fund within the Newspaper Development Committee established with the Government’s contributions, a separate subsidy cannot be appropriated in the budget. If the newspaper development fund itself is not a subsidy, the newspaper development fund paid to the Newspaper Development Committee shall not be deemed a subsidy, and if the newspaper development fund itself is not a subsidy, the amount paid from the above fund shall not be deemed a subsidy. However, the above provision states that an institution that has appropriated the contributions in the budget cannot include a subsidy in the budget for an institution that has appropriated the contributions in the budget. As seen earlier, the subsidy for the subsidized project, which is verified and disclosed within the newspaper development fund, is not a separate subsidy, and it shall not be deemed that the provision on the “Fund” under the National Finance Act applies mutatis mutandis to a substantial portion of the budget (Article 85 of the National Finance Act). Accordingly, the defense counsel’s assertion in this part is without merit.

2. Defendant 1 and his defense counsel asserted that there was no direct order by Defendant 1 to process false reports on departure equipment and performance-based payment. However, in light of the facts acknowledged in the above 2. Paragraph 2 and the following circumstances acknowledged by the evidence, i.e., Defendant 1 created a passbook in his name and used it for the management of the funds of Defendant Association’s secret funds, Defendant 1 agreed with Nonindicted 3 and 4 to raise the operating expenses of the Defendant Association with false business trip expenses and performance-based payment, Defendant 1 was the Secretary General acting on behalf of him and approved the settlement of the subsidized project and the performance-based report, etc., the facts charged of this case can be fully recognized.

In full view of all the circumstances, including the fact that the Defendant Association collected money used for purposes other than the purpose and returned it to the Newspaper Development Committee, that Defendant 1 appears not to use the money of this case for personal purposes, Defendant 1 did not have any particular criminal history, and that this case was retired from the Defendant Association, and all the circumstances constituting the conditions of sentencing, the sentence as ordered shall be determined.

[Attachment]

Judges Lee Jae-chul (Presiding Judge)

(1) Supreme Court Decision 2008Do5650 Decided September 11, 2008 held that Nonindicted Incorporated Foundation 5 was in violation of the Subsidy Act on the premise that receiving the funds purchased by fingers as part of the Inter-Korean Cooperation Fund managed by the Ministry of Unification from the Inter-Korean Cooperation Fund managed by the Ministry of Unification constituted “subsidies”.