Plaintiff (Attorney Kim Jae-in, Counsel for the plaintiff-appellant)

Financial Services Commission

September 13, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s request for improvement against ○ Credit Union on December 14, 2016 (the Plaintiff stated that the Plaintiff sought revocation of “a disciplinary measure against the Plaintiff” as stated in the complaint’s claim, but according to the written disposition (Evidence A 3), the disposition seeking revocation appears to be “a disposition claiming improvement against the Plaintiff against the ○ Credit Union,” and thus, the Plaintiff’s request is deemed to be “a disposition claiming improvement against the Plaintiff against the ○○ Credit Union,” and thus, the Plaintiff’s request is determined as above).

1. Details of the disposition;

A. From August 1, 2012, the Plaintiff retired on August 31, 2015 while serving as the former president of the ○ Credit Union (hereinafter “○○ Credit Union”). From February 25, 2016, the Plaintiff was elected as the president of the ○ Credit Union.

B. As a result of a sector inspection on ○○ New Cooperatives, the Defendant: “A union is unable to make a loan exceeding KRW 20/100 of its equity capital as of the end of the immediately preceding business year and KRW 500 million, which is the limit determined by the Financial Services Commission within the larger amount of KRW 1/100 of its total assets” [Article 42 of the Credit Unions Act, Article 16-4(1) of the Enforcement Decree of the same Act, Article 6(6) of the former Mutual Financial Supervision Regulations (amended by the Financial Services Commission Notice No. 2016-38, Oct. 24, 2016; hereinafter the same)]; as of May 28, 2015, the Defendant made a request for improvement of the credit union’s loan exceeding KRW 203,400,000 (hereinafter “instant grounds for disciplinary action”); and as of May 28, 2016, the Plaintiff made a request for each of the loans listed below (hereinafter “instant loans”).

4. Loan 20. 40. 40. 6. 40. 20. 40. 20. 14. 40. 20. 480. 11. 20. 480. 20. 490 8. 490, 2015. 8. 30. 40. 470. 470. 470. 470. 1, 2015, 207. 47. 5. 20. 47. 1, 207. 47. 1, 207. 204. 47. 1, 2013. 47. 1, 2014. 27. 1, 2014. 47. 25. 1, 2014. 7. 1, 2013

Note 2) 1,770

3) Nonparty 10

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2 and 3 (including branch numbers, if any; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition should be revoked because it is unlawful for the following reasons.

(i) the first argument;

Article 84(1) of the Credit Unions Act, which served as the basis of the instant disposition, applies to a person who is an executive officer or employee of a union, committed an illegal act while in office. Since each of the instant loans occurred while the Plaintiff was in office in the ○○ New Cooperatives, and thereafter retired from the ○○ Credit Union, even if the Plaintiff is currently in office as the chief executive officer of the ○○ New Cooperatives, the Plaintiff cannot take a disposition pursuant to the above provision against the Plaintiff.

(ii) the second argument;

Each of the loans in this case is a loan that the person who borrowed the loan in his own account obtained, and thus does not constitute a separate loan from the actual borrower, and thus, it cannot be deemed that the same person violated the restriction on lending limits.

In light of the above, there is no objective circumstance that the loan holder could not use the loan for the actual borrower because the Plaintiff could not know the relationship between the loan holder and the actual borrower, ② there was no objective circumstance that each of the loan holders at the time of the application for each of the loan of this case, such as providing collateral for the loan obligations, which is sufficient collateral value, and ③ the Plaintiff trusted the report to the loan holder, Nonparty 4, etc., who is the person in charge of the loan, and carried out each of the loan of this case, and therefore, there is a justifiable reason that cannot be caused by the Plaintiff’s breach of the duty.

(iii) the third assertion;

Even if the grounds for disposition are recognized, the disposition of this case is an unlawful act of deviating from and abusing discretion, in light of the following: (a) the Plaintiff contributed to the development of ○○ New Consultation by significantly improving the financial structure of ○○ New Consultation while in office; (b) the Plaintiff retired from office after the occurrence of the grounds for the disciplinary action of this case; and (c) the disposition of this case was taken during being elected as the chief director and was too harsh to the Plaintiff

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

C. Determination

1) As to the first argument

A) Article 84(1) of the Credit Unions Act provides that “If an executive officer or employee of a union or the National Federation fails to comply with the procedures and obligations under this Act or orders, articles of association or regulations under this Act, the Financial Services Commission may require the union or the National Federation to take measures, such as improving the relevant executive officer or employee.”

According to the foregoing, the Financial Services Commission may demand a union to take measures, such as improving its executive officers, when an executive officer, who works for the union, violates the obligations under the Credit Unions Act in performing his/her duties, and the change of executive positions in the union does not affect the gender of the disposition and the contents thereof. In addition, even in cases where an executive officer, who committed an illegal act, withdraws from the union for any reason or re-enters after withdrawal from the union, the necessity to take measures, such as improving the illegal act committed by the union during the past service of the executive officer, is maintained. Thus, the application of the above provisions shall not be deemed excluded unless there are special circumstances, such as the relationship with the union or the continuity of duties completely

Therefore, even if the Plaintiff retired from ○○ Credit Union after each of the instant loans, it cannot be deemed that the relationship with the Plaintiff and ○○ Credit Union or the continuity of duties is completely cut off, in light of the following: (a) even if the Plaintiff retired from ○○ Credit Union as a former officer within the short-term period of time after his/her retirement, and (b) there appears to exist continuity between the former duties and the current duties (general manager of loan business as a president). Therefore, it is reasonable to view that Article 84(1) of the Credit Unions Act is still applicable to the Plaintiff (Meanwhile, Article 84-2(1) newly established under the Credit Unions Act as amended by Act No. 11545, Dec. 11, 2012; (c) where the Financial Services Commission recognizes that a retired officer or employee of an association and National Federation would have been subject to any measure falling under any of the subparagraphs of Article 84(1) prior to his/her retirement from office or the National Federation is not applicable to the Plaintiff’s newly established or the National Federation.

2) As to the second argument

A) In full view of the statements in the evidence Nos. 1 to 18, part of the witness Nonparty 4, and the testimony of Nonparty 5 by Nonparty 5, the following facts are acknowledged.

(1) From May 1, 1980, the Plaintiff was employed and retired from office as a regular manager on September 30, 2010. At the time of August 1, 2012, the Plaintiff, upon Nonparty 5’s request, took charge of the loan business of ○○ New Credit Union.

(2) In particular, from May 27, 2013 to August 31, 2015, the Plaintiff is the head of the △△△ branch of the ○○ Credit Cooperative (hereinafter “○○ Credit Cooperative branch”) located in Seo-gu Incheon, Seo-gu, Incheon ( Address 1 omitted), and is engaged in business related to each of the instant loans, including conducting business related to the instant loans or granting approval on the loan documents.

(3) At the time of each of the instant loans, the Plaintiff introduced the actual borrower, the name holder, etc. of each of the instant loans from Nonparty 13 and Nonparty 14, who was his own South-North Korea, and sent them to Nonparty 4, who was the loan administrator, to undergo a loan consultation and examination. The detailed reasons are as follows.

In this context, Non-Party 1 and Non-Party 1 and Non-Party 1 were requested by Non-Party 13 at the time of Non-Party 1 and Non-Party 1’s father’s actual inspection of land industry development. Non-Party 16 explained to the Plaintiff that the loans will be used for the business of the land industry development corporation. Non-Party 15’s children, Non-Party 1, Non-Party 8 and Non-Party 9 were the mother of Non-Party 13 and the Plaintiff’s domicile [Non-Party 2] to meet the loan requirements. Non-Party 1 and Non-Party 1 and Non-Party 1 and Non-Party 1 and Non-Party 6, who were Non-Party 1 and Non-Party 1 and Non-Party 16, who were Non-Party 1 and Non-Party 6, who were the Plaintiff’s first Nonparty 1 and Non-Party 6, who were Nonparty 6’s husband’s address. At the time of the loan.

(4) At the time of each of the instant loans, the credit deliberation council did not have been held, and the evaluation of the collateral offered at the time was conducted on its own by referring to a search question or a nearby real estate successful bidder, etc., and did not conduct an objective evaluation of the collateral based on the appraisal through a certified public appraiser, case price data, publicly assessed individual land price, etc. As a result, the value of the collateral offered by a person holding the loan was over-evaluation of the value of

(5) Loans granted under each of the instant loans were used by the actual borrower for the benefit of the actual borrower, such as the purchase of real estate by the actual borrower and the repayment of debts, etc., or were directly paid to the actual borrower, and the actual borrower also repaid the interest.

(6) On December 21, 2015, the Financial Supervisory Service requested the Incheon District Prosecutors’ Office to investigate the Plaintiff on the ground that “the Plaintiff violated the prohibition of exceeding the lending limit to the same person by granting each of the instant loans.” On September 29, 2017, the Prosecutor of the Incheon District Prosecutors’ Office prosecuted the Plaintiff on charges of violating the Credit Unions Act that “the Plaintiff provided each of the instant loans exceeding the lending limit to the same person of the ○ Credit Cooperatives.”

B) First, we examine whether each of the instant loans exceeded the limit on loans to the same person.

(1) Even if a loan based on a person who has borrowed a loan under the name of another member, etc. does not exceed the loan limit to the same person, if the loan is based on a person to whom it actually belongs, the act of lending goes against Article 42 of the Credit Unions Act (see Supreme Court Decisions 9Do1280, Nov. 12, 199; 2001Do3531, Nov. 13, 2001; 2001Do3531, Nov. 13, 2001; etc.). If a loan is conducted on one’s own account even if it is granted under another’s name, it constitutes a loan to the person (the latter part of Article 42 of the Credit Unions Act). Meanwhile, the association may not grant a loan exceeding the amount determined by the Financial Services Commission within the maximum of 20/100 of its equity capital as of the end of the immediately preceding business year or of 1/100 of its total assets, which is the largest amount determined by the Financial Services Commission.

(2) In light of the source of the loan as seen earlier and the circumstances leading up to the repayment of interest on the loan, each of the loans in this case appears to have been executed on the account of each actual borrower, and the total amount of loans reverted to each actual borrower exceeds KRW 500 million at the time of the loan, each of the loans in this case is deemed to be in violation of the regulations on the restriction on the lending limit to the same person under Article 42 of the Credit Unions Act (On the other hand, on November 4, 2015, the Plaintiff asserted that the so-called "Masp loan of KRW 78 million to Nonparty 1 does not constitute the violation of the lending limit to the same person, but as seen earlier, the above loan does not include the grounds for the request for disciplinary action in this case).

C) Next, we examine whether there is any justifiable reason that is not attributable to the Plaintiff’s violation of the limitation on the amount of loan to the same person.

(1) Sanction against a violation of administrative regulations is a sanction against the objective fact that is a violation of administrative regulations to achieve administrative purposes. Thus, barring special circumstances, such as where there is a justifiable reason not to cause a breach of duties to the violator, it may be imposed even if the violator has no intention or negligence (see, e.g., Supreme Court Decisions 2010Du24371, Jun. 28, 2012; 79Nu251, May 13, 1980).

(2) In light of the following circumstances revealed by the above facts, it cannot be deemed that there is a justifiable reason not to mislead the Plaintiff’s violation of the limitation on loan amount to the same person.

(A) The Plaintiff recruited each of the instant loans by using his own land name as a loan recruitment book, and took overall charge of the loan-related affairs at the ○○ New Consultation branch where the loan occurred.

(B) Nonparty 13 and Nonparty 14, a loan recruitment book, directly introduced the loan applicants to the Plaintiff, and ordered Nonparty 4, a working-level, to verify whether the Plaintiff is possible to grant a loan to the loan applicants. Nonparty 4, etc., without conducting an objective evaluation, such as an appraisal, etc. on the collateral provided by the loan applicants, conducted a security based on the assessed value of the security which was voluntarily calculated by the method of search, etc., and during that process, did not hold

(C) At the time of each of the instant loans, the Plaintiff was a financial person engaged in loan business, etc. for not less than 30 years, and was in a position to exercise overall control over loan business, and thus, was responsible for managing and supervising the lending business so that unfair loans do not occur. Nevertheless, the Plaintiff did not have any management and supervision over the loans that are carried out as above.

(D) At the time of each of the instant loans, the circumstances revealed that the actual borrower and the nominal borrower were in a special relationship, such as relatives, employees of the company, and shareholders, were revealed, and the actual borrower also applied for a large amount of loans or applied for a loan exceeding the annual income amount, even in the case where the nominal borrower is in a private position. As can be seen, there have been objective circumstances to suspect the same person’s loan at the time of performing each of the instant loans. Furthermore, the case was confirmed in the loan documents that the addresses of the actual borrower and the nominal borrower were transferred to the same person to meet the same or to disguisedly meet the requirements for loans. This seems to have been based on the Plaintiff’s request or instruction by the ○○ New Consultative Agency.

D) Therefore, we cannot accept the Plaintiff’s above assertion on a different premise.

3) As to the third argument

A) Whether there is deviation or abuse of discretionary power in the request for disciplinary action

(1) When a disciplinary measure is taken against a person subject to the disciplinary measure, the decision to take a disciplinary measure is at the discretion of the person having authority to take the disciplinary measure. However, if the person having authority to take a disciplinary measure as an exercise of discretionary power is deemed to abuse the discretionary power that has been entrusted to the person having authority to take the disciplinary measure, the disciplinary measure is unlawful. If the disciplinary measure is intended to be deemed to be an illegal disposition that goes beyond the scope of discretionary power, depending on the specific cases, the contents and nature of the offense causing the disciplinary measure, the purpose of achieving the disciplinary measure, the criteria for a disciplinary measure, etc., and the contents of the disciplinary measure shall be deemed to be objectively unreasonable (see, e.g., Supreme Court Decisions 200Da60890, 6090, Aug. 23, 2002; 2004Du10852, Apr. 29, 2005).

(2) In the case of the instant disposition, since the Defendant did not have the authority to take an action against the Plaintiff but demanded the Plaintiff to take disciplinary action against the ○○ Credit Union, the above legal principle can be inferred. Therefore, considering the following circumstances, comprehensively taking into account all the circumstances alleged by the Plaintiff, it is difficult to deem that the instant disposition was excessively harsh to the Plaintiff, and thus, the Plaintiff’s assertion on this part is without merit.

(A) At the time of performing the loan for the instant wrongful act, the Plaintiff was almost in full charge of the loan business as the pre-consultation of ○○ New Consultation. Since the Plaintiff’s or the Plaintiff’s wife, etc. did not hold a credit deliberative committee but had the loan executed, the Plaintiff is responsible for each of the instant loans.

(B) The purport of the Credit Union Act to set up a provision prohibiting excess of the lending limit to a single person and impose criminal punishment on employees who violated the provision is to grant loans to the majority of union members by regulating excessive loans to a certain small number of loan debtors, and to lower the possibility of financial insolvency of credit unions by taking into account the case where it is difficult to recover the loans due to changes in circumstances in the future even if there is no particular problem in the loan obligor's ability at the time of lending, and to secure and maintain the soundness of the assets of credit unions. The act of irregularities in this case exceeds two billion won due to the act of misconduct in this case, and the amount borrowed in excess of the lending limit to a single person due to the act of misconduct in this case exceeds two billion won, and is not by the

(C) The Financial Supervisory Service established the regulations on the inspection and sanctions of financial institutions and established the detailed procedures for inspection and administrative sanctions or the detailed criteria for the determination of each offense. [Attachment Table 3] of the enforcement rule provides that the “standards for the imposition of sanctions by type of financial business or by type of violation” shall be imposed in cases where the handling ratio exceeding the limit for each borrower exceeds 2.5% or 700 million won in respect of the excessive handling ratio by the same person of executive officers and employees of a credit union, compared to total assets. The said determination criteria may also be applicable to the instant disposition that is applied at the time of disciplinary action against the Plaintiff of ○ New Credit Agreement or that is subject to the request for disciplinary action by determining the type of disciplinary action against the Plaintiff. In each of the instant loans, the handling ratio exceeding the limit for each borrower to the total assets (based on the end of 2014) reaches 3.15%, and the amount exceeding the limit exceeds KRW 2 billion. The instant disposition did not deviate from the above determination criteria

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Hah Tae-hun (Presiding Judge)

1) The total amount of ○ Newcom was KRW 51.37 billion as of the end of 2013, and KRW 64.674 billion as of the end of 2014, and each of which was KRW 500,000,000,000 won less than 1% was the limit on loans to the same person with ○○ Newcom, 2014 and 2015, respectively, at the time of each of the instant loans. In the case of Nonparty 2 as indicated below, although the first loan was made in 2013, the loans made in 2014 exceeded the limit on loans to the same person due to the loans made in the name of Nonparty 6 in 2014, the standard on the loans to the same person applies after 2014

2) Since May 28, 2015, the date of disposition, 2015, 285 recovered on August 19, 2015, the loan balance was not reflected.

3) The first holder of the loan was Nonparty 11, and Nonparty 10 accepted Nonparty 11’s loan obligations on December 2, 2014.