The meaning of “a false application or any other unlawful means” and “a subsidy has been granted in a fraudulent manner” under Article 40 of the former Act on the Budgeting and Management of Subsidies / Whether the amount of subsidy granted in excess of the amount to be granted in a fraudulent way to the project, etc., among the details of the application, does not exceed the aggregate of the amount corresponding to the true subsidy program and the amount of subsidy granted in a project deemed to have been granted if the subsidy had been granted in a fraudulent manner (negative)

Article 40 of the former Act on the Budgeting and Management of Subsidies (amended by Act No. 10898, Jul. 25, 2011) provides that “Any person who has received subsidies or indirect subsidies by false application or other unlawful means or any person who has received subsidies or indirect subsidies with knowledge of such fact shall be punished by imprisonment with prison labor for not more than five years or by a fine not exceeding five million won.” Here, “any false application or other unlawful means” means any affirmative and passive act that may affect the decision-making on the grant of subsidies by means of a deceptive scheme or other act deemed unfair by social norms, even though it is not possible to receive subsidies through normal procedures, and “the grant of subsidies by improper means” means the grant of subsidies in excess of the amount to be granted or to be paid to any work or project that is not subject to the grant of subsidies.

Therefore, even if the amount of the subsidy granted in excess of the amount to be paid to the project by such unlawful means as above does not exceed the amount corresponding to the true subsidy program among the details of the application and the amount of the subsidy for the project deemed to have been paid by being recognized as the subsidy program if the application was made, the portion of the project not applied is not included in the application of the subsidy program operator and the decision of the administrative agency on the grant of the subsidy, and thus, is not related to the application of the subsidy in question and the grant of the subsidy in question. Thus, such circumstance does not affect

Article 40 of the former Subsidy Budget and Management Act (Amended by Act No. 10898, Jul. 25, 2011; see Article 40 of the current Subsidy Management Act)

Supreme Court Decision 99Do4101 Decided January 5, 2001 (Gong2001Sang, 469) Supreme Court Decision 2013Do6886 Decided March 27, 2014

Defendant 1 and two others

Defendant 2 and Prosecutor

Attorneys Hong-ray et al. and one other

Busan District Court Decision 2015No4075 decided May 26, 2016

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

The grounds of appeal are examined.

1. As to Defendant 2’s ground of appeal

Examining the reasoning of the lower judgment in light of the evidence duly admitted, the lower court’s judgment that found Defendant 2 guilty of fraud is just and acceptable. In so doing, it did not err by misapprehending the legal doctrine or exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

2. As to the Prosecutor’s Grounds of Appeal

A. Article 40 of the former Act on the Budgeting and Management of Subsidies (amended by Act on the Management of Subsidies, Act No. 10898, Jul. 25, 201; hereinafter “Subsidy Act”) provides that “Any person who has received subsidies or indirect subsidies by false application or other unlawful means or any person who has knowingly received subsidies or indirect subsidies shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding five million won.” Here, “a false application or other unlawful means” refers to an affirmative and passive act that may affect the decision-making on the grant of subsidies by a deceptive scheme or other act deemed unfair by social norms, although it is not possible to receive subsidies through normal procedures, and “a person who has received subsidies by unlawful means” refers to a person who has received subsidies in excess of the amount that should have been granted or should have been paid for affairs or projects not subject to the grant of subsidies (see, e.g., Supreme Court Decision 9Do410, Jan. 5, 201).

Therefore, even if the amount of the subsidy granted in excess of the amount to be paid to the pertinent project by such unlawful means as above is not more than the amount corresponding to the true subsidy program among the contents of the application and the amount of the subsidy for the project expected to have been paid by being recognized as the subsidy program if the application was not filed, the portion of the project which was not applied as above is not included in the application of the subsidized project operator and the subject of the decision of the administrative agency to grant the subsidy, and thus, it does not affect the establishment of this crime.

B. Examining the reasoning of the lower judgment in light of the evidence duly admitted, the following facts are revealed.

(1) Defendant 3 Co., Ltd. (hereinafter “Defendant 3 Co.”), which was newly constructed and relocated around 2005, has caused water leakage in the above company’s office building, and thus, it was necessary to repair not only the second floor used as an office, but also the first floor used as a restaurant, an educational room, etc. of employees, such as fung and ice.

(2) Accordingly, Defendant 2, who operates Defendant 3 Company, received a written estimate from the construction company at the end of October 2010 for the removal, reconstruction, and equipment construction of the first floor, the roof of the above office building, outer walls, and floor waterproof construction. Nonindicted Co. 1 submitted a written estimate of KRW 126,510,000 (excluding value-added tax; hereinafter the same shall apply) in total including the cost of the waterproof construction work, 36,510,000 (excluding value-added tax; hereinafter the same shall apply). Defendant 1, who operates the ○○ industry, was able to perform construction of facilities, etc. for improving employment environment at a relatively low cost when using the employment environment improvement support fund implemented by the Ministry of Employment and Labor, and submitted a written estimate of KRW 64,08,000,000 for the remainder of the construction and equipment except for the waterproof construction work that he thought not to fall under the employment environment improvement project.

(3) Defendant 2’s proposal was accepted, and on November 19, 2010, submitted a plan to improve the employment environment by planting estimated amount to KRW 102,141,000 for the remainder of the construction and equipment except for waterproof construction works to the Busan Regional Labor Administration, which was approved by the above branch office on December 15, 2010.

(4) On or around December 17, 2010, Defendant 2 entered into a contract with Defendant 1 for the remainder of construction and fixtures excluding the cost of waterproof construction. From December 20, 2010, Defendant 2 left Nonindicted 2, who runs the construction of △△△△△△△, with KRW 38,00,000. Defendant 2, around December 17, 2010, entered into a false contract for construction with Defendant 1, up to KRW 102,141,000 for the remainder of construction and fixtures excluding the cost of waterproof construction with Defendant 1, up to KRW 600,00 for the increased amount of construction cost, KRW 12,35,100 for the construction cost, KRW 60,00 for the improvement of the environment, and KRW 105,000 for the above construction cost, KRW 60,000 for the improvement of the employment environment, including the payment of KRW 60,000 for the above construction work cost.

(5) On January 16, 201, Defendant 1 returned KRW 38,061,00 (including value-added tax), which is the difference between the construction cost and the actual construction cost, to Defendant 3’s side. Defendant 3 paid KRW 41,80,000 (including value-added tax) to △△△△△△ building that performed waterproof construction on January 20, 201.

C. Examining the above facts in light of the legal principles as seen earlier, the Defendants’ above acts are deemed to have been committed by preparing and submitting a false contract for construction work, which included the construction amount under the plan in advance, and created the appearance of the same as the actual payment of the construction amount. It appears that they could have an influence on the decision-making of the above branch office with respect to the granting of subsidies. Furthermore, even if the Defendants applied for employment improvement subsidies by including flood control construction works at the time, it was likely to receive the same amount of subsidies even if they were to have applied for employment improvement subsidies, and in fact, the said branch office did not take measures to recover subsidies by treating the same amount of subsidies after lawful payment. However, the above waterproof Corporation did not first include the Defendants’ application for the granting of employment improvement subsidies and the decision-making of the administrative agency. Accordingly, the Defendants’ above acts should be deemed to constitute “the case where subsidies were received by false application or other unlawful means” as stipulated in Article 40 of the Subsidy Act.

Nevertheless, the court below held that the Defendants’ act did not constitute “the case where the subsidies are received by false application or other unlawful means,” and rendered a judgment of innocence as to this part of the facts charged. In so doing, the court below erred by misapprehending the legal principles on the Subsidy Act, thereby adversely affecting the conclusion of the judgment. The prosecutor’s ground of appeal assigning this error is with merit.

3. Scope of reversal

As seen earlier, the part against Defendant 3 and the part against Defendant 1 and Defendant 2 of each of the lower judgment’s violation of the Subsidy Act (in the case of Defendant 1, the part on the annexed list No. 2 of the first instance judgment) against Defendant 1 and Defendant 2 should be reversed. Each of the above parts against Defendant 1 and Defendant 2 is in a mutual relationship between Defendants 1 and Defendant 2 (in the case of Defendant 1, the part on the above No. 2), respectively, with each other. Meanwhile, the lower court rendered a single sentence on the ground that the aforementioned part on Defendant 1 and the remaining guilty part on Defendant 2 constituted concurrent crimes under the former part of Article 37 of the Criminal Act. Accordingly, the lower judgment should be reversed in its entirety.

4. Conclusion

Therefore, 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 Park Sang-ok (Presiding Justice)