[1] The case holding that the crime of occupational embezzlement is established where the representative director arbitrarily uses the borrowed money under the name of the company

[2] The meaning of "auditor" under the former Act on External Audit of Stock Companies, and acts subject to punishment under Article 20 (1) 2 and (3) 3 of the same Act

[3] The case affirming the judgment of the court below which acquitted an accounting firm that was not subject to external audit in violation of Article 20 (1) 2 and Article 20 (3) 3 of the former Act on External Audit of Stock Companies on the ground that it does not constitute an "auditor" under the same Act

[1] In a case where there is no evidence to acknowledge that the representative director, at the time of receiving a loan under the name of the company, "self-reliance is an actual debtor, and the company is merely a primary debtor, or there is no intention that the loan manager would not be liable for the company as an obligor," the case holding that since the loan agreement between the financial institution and the company cannot be deemed as a false representation, the act of the representative director voluntarily withdrawing and using the loan belonging to the company constitutes occupational embezzlement, and the act of the representative director repaid the amount of the loan with the personal fund thereafter does not affect the establishment of a crime

[2] The phrase “auditor” in the former Act on External Audit of Stock Companies (amended by Act No. 8314 of Mar. 29, 2007) refers only to an accounting firm and audit team conducting an external audit with respect to a company subject to external audit under Article 2 of the same Act, etc., and Article 20(1)2 and Article 20(3)3 of the same Act shall be deemed to punish the act of forging, altering, damaging, or destroying a protocol of audit prepared by a “auditor” or interfering with the audit of the said “auditor.”

[3] The case affirming the judgment of the court below which acquitted Gap company of the facts charged in violation of Article 20 (1) 2 and (3) 3 of the former Act on External Audit of Stock Companies on the ground that Gap company is not necessarily obligated to undergo an external audit under the law, and the accounting corporation which has audited Gap company does not fall under "auditor" under the former Act on External Audit of Stock Companies (amended by Act No. 8314 of March 29, 2007)

[1] Articles 35 (1) and 356 of the Criminal Act; Article 3 (1) 2 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes; Article 108 of the Civil Act / [2] Articles 2, 14-2 (3), 20 (1) 2 (see current Article 20 (2) 2), and (3) 3 (see current Article 20 (4) 1) of the former Act on External Audit of Stock Companies / [3] Articles 2, 14-2 (3), and 20 (1) 2 (see current Article 20 (2) 2 and (3) 3 (see current Article 20 (4) 1) of the former Act on External Audit of Stock Companies (Amended by Act No. 8314, Mar. 29, 2007)

[1] Supreme Court Decision 98Da17909 delivered on September 4, 1998 (Gong1998Ha, 2394), Supreme Court Decision 2005Do3045 Delivered on August 19, 2005 (Gong2005Ha, 1536), Supreme Court Decision 2004Do5167 Delivered on November 10, 2006, Supreme Court Decision 2008Da772, 7789 Delivered on June 12, 2008 / [2] Supreme Court Decision 2002Do7340 Delivered on May 13, 2004 (Gong204Sang, 1021)

Defendant 1 and two others

Defendant 1 and Prosecutor

Law Firm Soho et al.

Seoul High Court Decision 2009No1531 Decided December 11, 2009

All appeals are dismissed.

We examine the grounds of appeal.

1. Determination on Defendant 1 and the Prosecutor’s grounds of appeal on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) due to the purchase of shares by Nonindicted Co. 2 of Nonindicted Co. 1

The amount of damages inflicted on the company by having the representative director, etc. of a company purchase shares of another company at a higher price in violation of his/her duties shall be deemed to be the difference between the purchase price of such shares and the market price. In the case of unlisted shares, the market price of the unlisted shares shall be deemed to be the market price if there is a normal example of transactions that properly reflects the objective exchange value: Provided, That in the absence of such a transactional example, a number of generally accepted evaluation methods shall be considered; however, it cannot be readily concluded that any one evaluation method shall be applied at all times; and it shall be reasonably determined by taking into account the relevant unlisted company and the transaction party’s situation at the time of the transaction, characteristics of the relevant business type, etc. (see, e.g., Supreme Court Decision 2005Do856, Apr. 29, 2005). Meanwhile, in order to determine the occurrence of damages caused by breach of trust in connection with a stock transaction, it is necessary to examine relatively the most reasonable evaluation method or standard and determine the damages specifically.

First, the lower court, based on its diverse circumstances as indicated in its reasoning, determined that the share transaction with Defendant 1’s Nonindicted 3 or Nonindicted 4 cannot be deemed as a transactional example that adequately reflects the objective exchange value of the shares of the instant Nonindicted Stock Company 2 (hereinafter “stock company” in the name of all companies”) and that no other adequate transactional example is found. Then, the lower court determined that, among the various methods used for the appraisal of the value of shares, the method of the “Rules on Issuance, Public Disclosure, etc. of Securities” was the most appropriate method that reflects the characteristics of the relevant company, and accordingly, determined that the difference between the value of the relevant shares calculated based on the basic materials as indicated in its reasoning and the sales price of the instant transaction was equivalent to the property damage caused by the instant

In light of the purport and reasoning of the above legal principles, although the judgment of the court below is somewhat insufficient, it is just in the conclusion that the amount of profit from the act of breach of trust in this case is at least KRW 500 million as stated in its holding. Furthermore, as otherwise alleged in the grounds of appeal by Defendant 1 and the prosecutor, the judgment below did not err in the misapprehension of legal principles as to the method of assessing the amount of loss caused by the act of breach of trust in this case and the act of breach of trust, or in the misapprehension of legal principles as to the calculation of damages caused by

2. Determination on Defendant 1’s remaining grounds of appeal

A. As to the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) due to the use of loans under the name of Nonindicted Co. 5

(1) In principle, the party who bears the rights and duties in financial transactions is determined on the basis of its name. Therefore, even in cases where a borrower borrows a loan in the name of a third party, barring special circumstances such as where a financial institution vests the legal effect of the loan between the name lender and the actual borrower, and where it is proved that the name lender has agreed not to impose a burden on the loan, etc., the validity of the loan shall not be denied by deeming the transaction as a mutual agreement between the financial institution and the name lender as a false transaction (see, e.g., Supreme Court Decision 2008Da7772, 7789, Jun. 12, 2008). Meanwhile, in the crime of embezzlement, the term "an intention to acquire unlawful acquisition" refers to an intention to dispose of the loan, such as the ownership of another person's property held in violation of his/her duty to pursue his/her own interest or a third party, and there is no intention to return or compensate it later (see, e.g., Supreme Court Decision 2006Do51674).

(2) According to the reasoning of the judgment below, at the time of receiving the instant loan as the representative director of Nonindicted Co. 5, Defendant 1 deemed that there was no evidence to acknowledge that “self-reliance is an actual debtor, and Nonindicted Co. 5 was merely a form-based primary debtor, or that a financial institution’s person in charge of lending was “the intent not to assume liability as an obligor against Nonindicted Co. 5.” Therefore, the court below determined that the instant loan agreement between the financial institution and Nonindicted Co. 5 cannot be deemed as a false declaration of conspiracy between the financial institution and the non-indicted Co. 5. Furthermore, the court below determined that Defendant 1’s withdrawal of the loan belonging to Nonindicted Co. 5 and arbitrarily used it for his own personal purpose due to the above circumstances, constitutes occupational embezzlement, and thereafter, the circumstance that the said Defendant repaid the amount equivalent to the loan with personal funds, etc

(3) Upon examining the purport of the above legal principles in light of the records, the judgment of the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there is no error in the misapprehension of legal principles as to the confirmation of a loan obligor or recognition of an intention of unlawful acquisition, which affected the conclusion of the judgment, and in violation of the rules of logic and experience and free evaluation of evidence

B. As to other grounds of appeal

Examining the evidence legitimately admitted by the court below in light of the reasoning of the judgment below, the court below's determination that all charges were guilty based on various circumstances or indirect facts as stated in its holding is just and acceptable. Contrary to the allegations in the grounds of appeal, the court below did not err by misapprehending the bounds of the principle of free evaluation of evidence or by exceeding the bounds of the principle of free evaluation of evidence or by

3. Judgment on the remainder of the grounds of appeal by the prosecutor

A. As to the violation of the Act on External Audit of Stock Companies against Defendant 2 and 3

(1) In the former Act on External Audit of Stock Companies (amended by Act No. 8314, Mar. 29, 2007; hereinafter “the External Audit Act”), the term “auditor” means only an audit and inspection team with an accounting firm conducting an external audit with respect to a company subject to external audit under Article 2 of the External Audit Act, etc. (see Supreme Court Decision 2002Do7340, May 13, 2004, etc.). Article 20(1)2 and Article 20(3)3 of the External Audit Act shall be deemed to punish the act of forging, altering, damaging, or destroying an audit report prepared by the said “auditor” or interfering with the audit and inspection of the said auditor.

(2) The lower court determined that there was no evidence of crime as to each of the facts charged in relation to the instant audit on the ground that Nonindicted Co. 2 was not necessarily subject to external audit under Article 2 of the External Audit Act, etc., and therefore, the accounting firm that conducted the instant audit does not fall under the said auditor.

(3) In light of the aforementioned legal principles and the reasoning of the lower judgment, the lower court’s determination is just and acceptable, and there is no error in the misapprehension of relevant legal principles. The Prosecutor’s ground of appeal on this part is merely a criticism against the lower judgment’s independent opinion contrary to the purport of the aforementioned legal principles

B. As to the grounds of appeal against Defendant 1 and 2

The court below ruled the defendant not guilty on the grounds that there is no evidence or lack of evidence to prove the defendant guilty. Examining the reasoning of the judgment below in light of the evidence and related legal principles duly adopted by the court below, the court below did not err by misapprehending the legal principles on facts beyond the bounds of the principle of logic and experience and free evaluation of evidence or by exceeding the bounds of the principle of free evaluation of evidence, thereby affecting the conclusion of judgment

4. Conclusion

Therefore, all appeals are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Ji-hyung (Presiding Justice)