2013Gohap812 Violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement),

Violation of this Market and Financial Investment Services and Capital Markets Act

2013 initially 3662 Application for a compensation order

A

Heroop (prosecution), mobile words (public trial)

Law Firm B

C. Attorney C.

D. Corporation

February 20, 2014

The defendant shall be innocent.

The summary of the judgment against the defendant shall be published.

The application for compensation of this case is dismissed.

1. The facts charged in this case

Since March 2009, the Defendant was operating E Co., Ltd. established for consulting business related to corporate mergers and acquisitions from around 201, January 11, 201, the Defendant was appointed as directors and vice presidents in charge of finance of D Co., Ltd. (hereinafter referred to as “D”) established for the purpose of manufacturing pharmaceutical products and wholesale and retail business, and D takes over D Co., Ltd. F (hereinafter referred to as “F”) established for the purpose of trading chemical products around August 25, 201, and was appointed as directors and vice presidents in charge of F’s strategic affairs around August 26, 2011.

Around August 11, 2010, the Defendant: (a) proposed the acquisition of shares by 20 billion won from D’s representative director G and H; and (b) concluded a share acquisition agreement with D on October 15, 201 with Japan; (c) purchased 36.6% of the I shares using D’s capital increase through D’s capital increase until December 201; (d) purchased shares from 200 billion won from D’s 201 to F’s 21.2; and (e) purchased shares from D’s 201.2 billion won from D’s 201 to F’s 9.28 billion won from D’s 201.7 billion won from D’s 201.7 billion won from D’s 24,4444,4505.25 billion won from D’s 201.

On the other hand, D and F have promoted the acquisition of L Co., Ltd. (hereinafter referred to as “L”) established for the purpose of cosmetic wholesale and retail business, etc. to enter into the biotechnology-related business from the Haman on October 201, 201, and the Defendant was the vice president in charge of F's strategic affairs.

As above, while the Defendant was in charge of finance-related business and corporate acquisition business for D and F, it appears that the financial structure, business prospects, and profitability of L, which was under review of whether to take over L, were very good, and if F takes over L, it would act as F F’s own stock price, and I would continuously increase its value by entering into a technology use contract with N, which is a multilateral pharmaceutical company of the United States, and enter into a business use contract with N, which is a multilateral pharmaceutical company of the United States, with F’s holding 29.9% of the I’s shares. On the anticipated, the Defendant committed the following crime with F’s holding stocks 2,222,22 shares of D, which were kept by the Defendant, arbitrarily provided as security to the bond company and purchased F’s shares using another person’s name by purchasing the F’s shares.

1. Violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes;

A. On November 14, 201, the Defendant provided at the 12th floor of the building in Jung-gu in Seoul, Jung-gu, Seoul to K as security and leased KRW 10 billion to K, without a resolution of D’s board of directors, the FF shares 2,22,222 shares in D, which were owned by the Defendant’s company, in the office of the 12th floor of the building in Jung-gu, Seoul through the branch P.

Accordingly, the Defendant embezzled the amount equivalent to KRW 21,866,64,480 at the market price of 2,222,222 shares owned by the victim D.

B. On April 16, 2012, the Defendant received a loan of KRW 10 billion from Q Q to substitute the loan of KRW 10 billion from the above 17th floor of the above building, and provided KRW 2,222,222 of the F shares, which the Defendant offered as security, as in the preceding paragraph, to Q Q, as well as KRW 222,22 of the F shares owned by the Defendant, which were additionally kept by the Defendant.

Accordingly, the Defendant embezzled the amount equivalent to KRW 1,762,220,460 at the market price of 222,222 shares owned by the victim D.

2. Violation of the Financial Investment Services and Capital Markets Act;

(a) No person who becomes aware of material nonpublic information related to the business, etc. of a listed corporation in connection with his/her duties as an executive, employee, or proxy of a corporation or such corporation shall use such information for the trading of specific securities, etc. or any other transaction or allow

On October 2010, the Defendant: (a) obtained L from L in Ro in Sungnam-si, Sungnam-si; (b) sought L from L in Ro-si; (c) sought L from L to enter into the biotechnology industry while seeking L; and (d) requested F to examine the basic data on L; (b) obtained the F’s consent by proposing to transfer the L/C shares owned by the said L/C to L to F; (c) obtained a positive report from the said S; (d) obtained the L’s business status, financial structure, acquisition feasibility, etc.; and (e) obtained a positive report from the said S; (e) anticipated that F would increase the F’s share price when entering the biotechnology industry, and (e) purchased F’s shares in the name of another person; and (e) obtained F’s profits.

On November 17, 2011, the Defendant purchased FF shares of KRW 500,00 in the name of G via G via G using KRW 10 billion leased as set forth in the above 10 billion A, and purchased FF shares of KRW 100,00 in the name of X on the 25th of the same month, purchased FF shares of KRW 100,00 in the name of X, purchased FF shares of KRW 522,148 in the name of Z from the 18th of the same month to the 28th of the same month, and purchased F shares of KRW 1,222,148 in the name of Z and purchased F shares of KRW 2,314,960,440 in the name of Z.

Accordingly, the defendant, as a director of F, used F's material nonpublic information that he came to know in the course of performing his duties to sell F's shares.

(b) A person who comes to hold stocks, etc. of a stock-listed corporation in bulk (referring to cases where the total number of stocks, etc. held by the person himself/herself and his/her specially related persons is at least 5/100 of the total number of such stocks, etc.) shall report the status of holding, the purpose of holding, the terms of major contracts concerning the stocks, etc. held, and other matters prescribed by Presidential Decree to

On November 17, 2011, the Defendant purchased F shares equivalent to 6.84% of the total number of F shares in the name of W, X,Y, and Z as set forth in the preceding paragraph, and did not report to the Financial Services Commission and the Exchange, even though the Defendant purchased F shares equivalent to 6.84% of the total number of F shares in the name of the Defendant.

(c) Any executive or major shareholder of a stock-listed corporation shall report to the Securities and Futures Commission and the Exchange respectively, the ownership status of specific securities, etc. owned on his/her own account regardless of in whose name the stocks are held, and, if there is a change in the ownership status of such specific securities, etc., five days from the date on which such change occurs, in accordance

The Defendant, as a director of W, X,Y, and Z, purchased F shares equivalent to 6.84% of the total number of F shares in the name of W, X,Y, and Z as above and did not report to the Securities and Futures Commission and the Exchange, even though he purchased F shares equivalent to 6.84% of the total number of F shares in the Defendant’s account.

2. Defendant and his defense counsel’s assertion

Since the Defendant purchased F shares on D’s account through the internal decision-making process, the Defendant’s purchase of F shares was premised on the Defendant’s purchase of F shares for personal interest, the crime described in paragraphs 1, 2-b, and 3 of the instant facts charged cannot be established. Furthermore, since it is unclear whether the Defendant would accept F shares at the time of the purchase of F shares, it cannot be said that the Defendant purchased F shares using undisclosed information, such as those listed in paragraph 2(a) of the instant facts charged.

3. Determination

1. According to paragraphs 1 and 2-B of the facts charged in this case, according to the defendant's partial statement, witness, and W's each legal statement, each police statement, investigation report (Evidence List No. 21), and each securities account statement (Evidence List No. 24, 42, 44, and 45), the defendant borrowed money from P as stated in paragraphs 1 and 2-B of the facts charged in this case as security of the F stocks held by the defendant and demanded the defendant to purchase 930,0000 shares (50,0000 shares from K, about 40,000 shares from K, about 30,000 shares, and about 30,000 shares were purchased) on the account of the defendant's own account under the name of "W et al." (Evidence No. 1), it is recognized that the defendant provided the above D's own stocks to the effect that the defendant had no other evidence to acknowledge the defendant's purchase of the stocks for the purpose of D's own interest or its own interest.

1) First, according to G and H’s respective legal statements and D’s corporate register (Evidence Nos. 4), it is examined as to whether the Defendant obtained the consent of G and H in relation to the purchase of F’s stocks under the name of the name of the representative director, G, H, and Defendant around November 201.

G stated in this court that “(i) A was required to be financed by D with a selective differential loan around November 201, 201, i.e., return of I’s preemptive rights, exercise of I’s preemptive rights, and implementation of a purchase guarantee agreement with J, and there was a need to secure F shares additionally, the Defendant proposed to purchase F shares as collateral and consented thereto, and (ii) the investigative agency stated to the effect that the Defendant was unaware of the purchase of F shares with a borrowed amount as collateral for D’s F shares, but the details of the purchase of F shares are well known by the Defendant and made a false statement because it might be liable for criminal liability.” G’s statement in this court is that “The Defendant visited Qu office as of April 16, 2012, visited Qu2,44,440 billion won and borrowed F shares as collateral.”

Since it is consistent with the statement of the police statement of Q Representative AA and the statement of the prosecutor's office on the P that "at the time of borrowing 10 billion won from Q on April 16, 2012, G affixed the loan certificate," it can be sufficiently reliable.

In addition, H made a statement in this court that “D mainly delegated matters concerning management decision-making while conducting research on new drug development to G, and the Defendant provided the F stocks owned by D as collateral, and explained that “H used the F stocks owned by D to raise funds for D from the time when the Defendant provided D’s F stocks as collateral.”

According to the above legal statements of G and H, the Defendant could be found to have undergone the process of internal decision-making in D prior to offering the F shares in D as collateral, or immediately thereafter informed D’s directors of the purchase of F shares on D’s account. As such, it is difficult to view that the Defendant embezzled F shares, which are assets of D D’s future, and then purchased F shares on its own account using them.

2) Around November 201, 201, D requires funds due to the following circumstances, and there was a considerable number of need for further purchase of F shares. D was held as F shares and stocks, but D was held as assets. Since I shares were unlisted shares, it seems that it was difficult to raise funds by using I shares rather than using F shares (G and S respective statutory statements).

A) The selective differential loan D received an investment of KRW 5.3 billion in total from AC, etc. during the process of acquiring F, and agreed to repay the investment principal until February 25, 2012, guarantee the investment principal, and to provide F’s share price increase of KRW 4,500 per share at the time of F’s acquisition in kind, or to provide F’s share price increase of KRW 10,000 per share in cash. On November 201, F’s shares increased above KRW 10,00 per share (G’s legal statement, F’s share price data (Evidence 52), No. 6, and under the above agreement, D made a statement from 20,000 to 20,000 shares at the time of purchase in advance, and made a statement from 20,000 to 20,000 shares at the time of purchase in advance. Since F’s share purchase in kind was required to be made in preparation for the continuous increase of F’s share price increase of KRW 10.

B) Around June 17, 201, J entered into a contract with the J to acquire F shares of KRW 10 million per share of KRW 4,500 per share. However, around August 25, 2011, the J concluded a contract to acquire D 4,44,45 shares, and K 2,22,22 shares, the total amount of KRW 6,66,67 shares 6,60 per share from J to KRW 4,500 per share. As above, around July 27, 2011, D had D purchase the shares of KRW 3,33,333 shares, and 33 shares at its own discretion until December 31, 201, and D purchase the shares of KRW 4,500 or 30 shares at its own discretion during the process of changing the number of shares to be acquired, D purchase the shares of KRW 4,500 per share, and D purchase the shares at its own discretion, around 2012.

Although the J made a statement to the effect that the above purchase agreement was destroyed under the agreement between the parties immediately after the conclusion of the agreement (the police statement to the J), S made a statement to the investigative agency that the above purchase agreement was destroyed on or around September 201 (the second police statement to the SS), according to the securities account specification (Attachment to the police statement to the J) by the J, at the price of 1,200,000 won per share around September 20, 201, at the price of 1,200,000 won per share around November of the same year, and at the price of 1,580,000 won per share (the sum of 1,00,000 won per share) as well as at the price of 2,200,000 won per share after the above purchase agreement was concluded by the J as a broker of the defendant, the above purchase agreement was terminated and terminated, and there was no possibility that the above purchase agreement would be no possibility to be terminated only after the public disclosure of the agreement with D and the above purchase.

Therefore, D is not only obligated to purchase F shares under a purchase guarantee agreement between J around November 201, 201, but also required to purchase F shares in order for D to secure the stable management right as a major shareholder of F.

C) According to I’s exercising price mechanism for preemptive rights, AE’s legal statement and evidence Nos. 14 and 15, D entered into a contract with I on October 2010 to acquire D’s shares equivalent to 36.6% of D’s shares and 13.3.% of D’s preemptive rights. D paid approximately KRW 4 billion to I by December 31, 201 in order to exercise the preemptive rights under the above underwriting contract. I entered into a technology transfer contract with N and E’s multinational pharmaceutical company after the above underwriting contract, and if D exercise the preemptive rights, it can be recognized that D’s interest equivalent to the increase in D’s share price would have been realized. Furthermore, in light of the possibility that D’s purchase of shares by borrowing 30 billion won as collateral and the possibility that D’s purchase of shares for the purpose of exercising the preemptive rights was 30 billion won of D’s shares.

D) Distribution of minor shareholders

According to G and S’s respective legal statements and evidence Nos. 24 and 25, D, by January 30, 2012, distributed a total of KRW 5 billion to shareholders until January 30, 2012, and in order to raise the above dividend fund, the Defendant may also have borrowed the F shares owned D as security through P.

3) Lastly, as to the reasons why D purchased F shares in the name of B, etc., it was necessary for D to purchase F shares in addition to F shares and secure management rights. However, even if F shares are purchased due to various circumstances as seen earlier, it was necessary to sell them again and use funds equivalent to profit-making profits. Therefore, since D, a major shareholder of F, has a risk of price decline if F shares are sold, it cannot be readily rejected the Defendant’s lawsuit that purchased F shares in the name of B.

2. According to the evidence duly adopted and examined by this court as to Article 2-A of the facts charged in the instant case, the FF’s directors proposed the Defendant to accept L on October 201, the FF’s proposal, examining data on L from around that time to around November 16, 201, prepared a review report on L (Evidence No. 64) on L, and conducted a verification on L on December 13, 201, and conducted a verification on L around December 201, the FF’s board of directors decided to accept L on January 13, 2012, and the FF entered into an underwriting contract with the acquisition of stocks equivalent to 57% of the L equity from T, and the Defendant is recognized as having purchased the FF shares under 930,000 won around November 20, 2011.

Furthermore, even if the Defendant was 1 to have purchased the F shares by using information that the FF would have increased and expected to have increased the number of shares, it is difficult for the FF 1 to take over the shares of the Defendant at the time of the FF 2, the FF 1 to review the following circumstances, i.e., whether the Defendant would have been able to take over the shares under the name of the FF 1, i.e., the FF 2, and the F 1, i., the Defendant would not have been able to take over the shares of the F 2, i.e., the F 1, 201, i., the F 2, i.e., the F 1, 201, and ii the FF 1, i.e., the F 1, 200, 1000,0000 won prior to the receipt of the shares under the name of the F 1,500,000 won.

It is difficult to see otherwise, and there is no other evidence to acknowledge it, and rather, it is reasonable to see that D purchased F shares due to the reasons such as selective differential loans, the implementation of a purchase guarantee agreement with J, etc., as examined in the judgment of paragraphs (1), 2-b, and (c) of the instant facts charged.

4. Conclusion

Thus, since all of the facts charged in this case constitute a case where there is no proof of crime, the judgment of innocence is rendered under the latter part of Article 325 of the Criminal Procedure Act, the summary of the judgment of innocence is published under Article 58(2) of the Criminal Act, and the application for compensation is dismissed under Article 32 of the Act on

The presiding judge, senior judge;

Records of Judges

Judges Kim Jae-hee

1) P purchased shares of approximately KRW 300,000 as a security of about 930,000 of the F shares so purchased ("one kind of alternative transaction"), and it is unclear whether the Defendant consented to further purchase in such a form.

2) We will examine these circumstances in detail thereafter.