2015 Highest 908 Violation of the Mutual Savings Banks Act

1. A;

2. B

strict (prosecutions, public trials) and teared leathers (public trial)

C Law Firm (for Defendant A)

Attorney D, E, and F

Attorney G (for Defendant B)

June 9, 2016

Defendant A shall be punished by a fine of KRW 15 million, and Defendant B shall be punished by a fine of KRW 20 million.

In the event that the Defendants did not pay the above fine, each of the 100,000 won was converted into one day, the Defendants shall be confined in the workhouse.

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

Criminal facts

Defendant B served as the representative director of H from August 31, 2001 to August 31, 2013, and as of October 7, 2010, Defendant B is a major shareholder holding 86.0% of the shares of the above bank as of October 7, 201, and Defendant A is his father.

1. The shareholders, executives or employees who hold at least 2/100 of the total number of voting shares issued by Defendant A mutual savings bank, and lineal ascendants or descendants, and spouses of the above large shareholders and executives or employees shall not receive credit extension from the mutual savings bank

Nevertheless, the defendant, however, was urgently required to pay the Humanistic Business Fund, and the defendant was willing to receive a loan from H by lending the name of the defendant I, who is the seat of the defendant.

On October 6, 2010, the Defendant prepared a loan application and submitted it to M with I at the K Office of the Defendant’s management company in Gangnam-gu Seoul J, and with I, H executives and employees of H, Co., Ltd.

On October 7, 2010, the Defendant borrowed KRW 500,000 from H to the new bank account (Account Number:N) with I’s name, and then used the said loan for the Defendant’s business fund by obtaining the passbook connected to the said account from I.

Accordingly, the defendant was granted credit extension from H with the representative director and the major shareholder.

2. Defendant B

No mutual savings bank shall extend credit to any shareholder, executive or employee, lineal ascendant or descendant, or spouse of the large shareholder or his/her executive or employee, who holds at least 2/100 of the total number of voting shares.

Nevertheless, as stated in paragraph (1) of October 7, 2010, the Defendant applied for a loan under the name of the Defendant’s father and wife A, and the Defendant, despite being aware that the loan was borrowed from borrowed name loans, had the Defendant lent KRW 500,000 to H, with the knowledge that it was a borrowed name loan.

Accordingly, the defendant, the representative director of H and the majority shareholder, extended credit to the defendant's father A.

Summary of Evidence

1. Defendants’ respective legal statements

1. Statement of witness 0 in the second protocol of the trial;

1. The entry of witnesses and M in the third protocol of trial;

1. Legal statement of a witness I;

1. Each prosecutor's protocol of statement concerning 0, M, L, and I;

1. Loan application form, letter of loan, letter of credit transaction, request for a credit transaction agreement, record keeping and inquiry meeting, customer comprehensive information inquiry meeting, real estate provided as security, B's family relation certificate, I's account transaction details, details of transfer of each loan, details of transfer of each loan, account transaction by A, details of account transaction by B, details of account transaction by B, and data on calculation of LTV for this loan;

1. In full view of the investigation report (H shareholder and financial status), shareholders and financial status (H), investigation report (verification of excess of the loan TV limit), investigation report by the Korea Deposit Insurance Corporation, inspection report by the Financial Supervisory Service (Defendant B and the defense counsel), Defendant B alleged that Defendant A was unaware of the fact that the loan was made from H under the name of Defendant A, but at the time, Defendant B was well aware of the fact that Defendant A was making a loan from H under the name of Defendant A, since L, who was in charge of credit examination as the auditor of the second prosecutor’s office, made a statement corresponding to the facts charged, and up to this court, Defendant B was consistently aware of the fact that the loan was made under the name of Defendant A, and the content of the statement is specific and consistent, and M&, who is a working person of H’s loan, also complies with L’s statement, Defendant A, like the facts charged by Defendant B, can sufficiently recognize the fact that it was granted credit to Defendant A under the name of the mutual savings bank, and it is insufficient to recognize the above facts alleged by witness, Q and defense counsel.

Application of Statutes

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

Each former Mutual Savings Banks Act (Amended by Act No. 12100, Aug. 13, 2013); Article 39(2)3 and the main sentence of Article 37(1) (Appointment of fines)

1. Detention in a workhouse;

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

1. Order of provisional payment;

Article 334(1) of the Criminal Procedure Act (Article 37(1) of the former Mutual Savings Banks Act prohibits credit extension to a person in a special relationship with a mutual savings bank, such as a major shareholder, and Article 2 subparag. 6 of the Mutual Savings Banks Act prohibits credit extension to a person who is in a special relationship with a major shareholder, etc., as prescribed by Presidential Decree. The term "credit extension" means payment, loan, payment guarantee, purchase of securities in the nature of financial support, and other direct and indirect transactions of a mutual savings bank that follow credit risk. In such cases, credit extension on the principal's account, regardless of in whose name it is named, shall be deemed a credit extension on the principal's account. Therefore, whether a credit extension to a major shareholder, etc.

14. Supreme Court Decision 2012Do12582 Decided January 1, 201

In light of the above legal principles, according to the evidence adopted and examined in the summary of the above evidence, it is acknowledged that Defendant A used KRW 500 million borrowed from H as its business fund under the name of Defendant A as its own test fund. If the facts are identical, the above amount of KRW 500 million should be deemed to have been granted credit to Defendant A, who is a lineal descendant of the majority shareholder.)

The Defendants’ act on the grounds of sentencing is to escape from the provisions of the Mutual Savings Banks Act prohibiting credit extension to major shareholders, etc. in order to prevent the insolvency of mutual savings banks due to reckless credit extension, and to protect deposit holders, and it is in need of corresponding punishment accordingly. However, the fact that Defendant A provided an apartment complex in the name of Defendant A as security, which owned a considerable value in obtaining a loan, and the H does not actually fall into any insolvency is favorable to the Defendants. Furthermore, the Defendants, including these circumstances, shall be subject to a fine only once in consideration of all the circumstances indicated in the instant pleadings, such as the Defendants’ age, character and conduct, intelligence and environment, motive, means and consequence of the crime, and circumstances after the crime, etc., and the amount of fine shall be determined as stated in the order, taking into account the nature of the crime and the circumstances following the crime.

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