[1] The case holding that in a case where the defendant, who was scheduled to be appointed as a director of Gap company, a reorganization company, notified the Eul company that widely known fact that "the defendant is expected to be sold to the public and has real estate sales proceeds," and received a large amount of money from Eul company upon the Eul company's request that "if the minority shareholders of Gap company were to obtain the shares of Eul company, to provide data and information so that the company may take over the shares of Eul company, and to act to benefit the company in future," after being appointed as director of Gap company, it cannot be deemed that there was a violation of the director's duty or any "illegal solicitation" related to the acquisition and merger of Gap company

[2] The case holding that the crime of breach of trust is established on the grounds that although the intent is included in the motive of corporate acquisition and merger that the acquired company will repay its obligation for the acquired loan with the assets of the acquired company after the merger, the method of LBO acquiring the assets of the acquired company as collateral differs from its basic premise, and there is no defect in the substance or procedure of the merger

[1] The case holding that in a case where the defendant, who was scheduled to be appointed as a director of Gap company, a reorganization company, notified the Eul company that widely known fact that "the defendant is expected to be sold to the public and has real estate sales proceeds," and received a large amount of money from Eul company upon the Eul company's request that "if the minority shareholders of Gap company were to obtain the shares of Eul company, to provide data and information so that the company may take over the shares of Eul company, and to act to benefit the company in future," after being appointed as director of Gap company, it cannot be deemed that there was a violation of the director's duty or any "illegal solicitation" related to the acquisition and merger of Gap company,

[2] The case holding that the crime of breach of trust against the director, etc. of the company A was committed on the ground that the method and basic premise of acquiring the assets of the company A are different from the LBO method and its basic premise, and it cannot be deemed that the company A suffered loss due to the lack of the substance or procedure of the merger, in case where the company B invested with its affiliate to acquire the company A, obtained the stocks of the company A by borrowing the acquisition funds from the financial institution, and the company C acquired the stocks of the company A by borrowing the acquisition funds from the financial institution, and the company C was merged with the company C, and repaid the above acquisition loans with the funds held by the company A after the merger

[1] Article 357 of the Criminal Act / [2] Articles 355(2) and 356 of the Criminal Act

Defendant 1 and two others

Defendant 2 and Prosecutor

Sick Number of Sicks

Law Firm International et al.

Busan District Court Decision 2008Da482, 516 (Consolidated), 656 (Consolidated) Decided February 10, 2009

All appeals filed by Defendant 2 and prosecutor against the Defendants are dismissed.

1. Summary of grounds for appeal;

A. Defendant 2

(1) misunderstanding of facts or misapprehension of legal principles

The lower court found the Defendant guilty of occupational embezzlement of KRW 141,235,482, which was kept in the account in the name of Nonindicted Co. 12, etc., and is funds that may accrue to the investment business headquarters of the entire ○○ Group or ○○○ Group’s investment business headquarters, rather than funds that may accrue to Nonindicted Co. 6. The Defendant used the above funds held at the ○○ Group’s level as the head of the ○○ Group’s investment business headquarters only for the performance of duties (business promotion expenses, officers and employees’ meeting expenses, and the number of activities for the construction business sector of Nonindicted Co. 6 Co. 2), and thus, cannot be recognized as an intention of unlawful acquisition. Nevertheless, the lower court found the Defendant guilty of the above facts charged, and thus there was an error of misapprehending the legal doctrine on the “other party’s property” and “an intention of unlawful acquisition” in the crime of embezzlement.

(2) Unreasonable sentencing

The punishment sentenced by the court below against the defendant (5 million won of a fine) is too heavy.

(b) Prosecutors;

(1) misunderstanding of facts or misapprehension of legal principles

(A) As to the violation of trust against Defendant 1 and the violation of trust against Defendant 2 and Defendant 3

① around August 206 upon the request of the controlling shareholders of Nonindicted Company 1, the controlling shareholders of Nonindicted Company 1 were entitled to enter Nonindicted Company 1 with the legal administrator of Nonindicted Company 2 in return for Nonindicted Company 7’s purchase of shares, and Defendant 1’s consent was required to comply with the authority or business affairs related to Nonindicted Company 1’s management, even before the acquisition of the status. However, Defendant 1 was expected to be sold to the public in the course of entry, and was informed Nonindicted Company 5 of such information that Nonindicted Company 1 would have possession of cash KRW 170 billion, and Defendant 2 was able to acquire such internal information from Nonindicted Company 1 through Nonindicted Company 5 in advance for the acquisition of a small number of shares to be distributed to Nonindicted Company 7’s acquisition of shares. Furthermore, according to Defendant 1’s statement, it was necessary for Nonindicted Company 1 to recognize that there was a need for Nonindicted Company 1’s acquisition of shares from Nonindicted Company 1 to the maximum extent possible for the acquisition of shares by Nonindicted Company 7’s employees.

Ultimately, Defendant 2 and 3, etc. conspired with Defendant 1 to make an illegal solicitation and to pay a large amount of money worth KRW 1.93 million in return. Nevertheless, the lower court erred by misapprehending the legal doctrine on the crime of giving and receiving property in breach of trust or giving and receiving property in breach of trust, among the facts charged in the instant case, by acquitted Defendant 2 and 3 as to each of the facts charged in breach of trust or giving and receiving property in breach of trust.

(B) As to Defendant 2 and 3's violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation)

Since the so-called “H Pro rata” was planned to repay the acquisition price of Nonindicted Co. 1’s assets from the beginning with Nonindicted Co. 7 and Nonindicted Co. 1’s merger, Nonindicted Co. 7 and the lender agreed to repay the total amount of the loans first, 15 months from the date of the initial withdrawal of the loan, or one month from the date of the completion of the merger registration, whichever is earlier. Since Nonindicted Co. 7’s acquisition of Nonindicted Co. 1’s assets cannot pay business profits within 15 months from the date of the acquisition of the above loans, the acquisition price of Nonindicted Co. 1’s assets can only be repaid with the assets of Nonindicted Co. 1; Nonindicted Co. 1’s acquisition price was paid after the merger with Nonindicted Co. 6’s assets; Nonindicted Co. 1’s merger with Nonindicted Co. 1’s assets was in violation of the so-called “Agreement on Employment Security and Continuation;” Nonindicted Co. 1’s merger with Nonindicted Co. 1’s assets at the time of the merger or acquisition of new assets.

(C) As to Defendant 2's violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement)

As seen earlier, Defendant 2’s crime of giving property in breach of trust is established. As such, Defendant 2’s crime of giving property in breach of trust that Defendant 2 paid to Defendant 1 for the benefit of Defendant 1, and Defendant 6’s non-indicted 6, who is the owner of the said money, did not have any reason to consent to the use of the said money for criminal acts. Accordingly, Defendant 2 is embezzlement as it used the said money in breach of the purpose of entrustment. The remainder of KRW 365 million was used for the benefit of other affiliate or members of the ○○ Group other than the non-indicted 6, even though Defendant 3 specified the use as the use for the non-indicted 6, and thus, Defendant 3 used the said money for the benefit of the non-indicted 6, the intent of obtaining property in breach of trust constitutes embezzlement. Nevertheless, the lower court erred by misapprehending the legal doctrine on the intent of obtaining property in breach of trust

(2) Unreasonable sentencing

The punishment sentenced by the court below against Defendant 2 (5 million won of fine) is too minor.

2. Determination

A. Defendant 2's assertion of mistake or misapprehension of legal principles

In the lower court’s argument that is identical to this part of the grounds for appeal, the lower court stated in detail the judgment on this part as the title “Judgment on Defendant 2’s defense counsel’s assertion”. In light of the records, the lower court’s aforementioned judgment is justifiable and acceptable. Thus, this part of the Defendant’s allegation is without merit.

B. Prosecution's misconception of facts or misapprehension of legal principles

(1) As to the violation of trust against Defendant 1 and the violation of trust against Defendant 2 and Defendant 3

(A) Facts of recognition

According to the records, the following facts can be acknowledged.

① At the time of September 6, 2004, Nonindicted Co. 1’s statutory administrator Nonindicted Co. 2 sold the land located in Mapo-dong to Nonindicted Co. 3 at KRW 285 billion, and Nonindicted Co. 1 contracted 20% of the construction right of constructing new apartment on the ground from Nonindicted Co. 3. If Nonindicted Co. 3 did not grant the construction right, Nonindicted Co. 3 agreed to receive KRW 10 billion as penalty.

② However, as a result of the occurrence of a dispute over the construction right between Nonindicted Co. 3 and Nonindicted Co. 2, Nonindicted Co. 1, who was experienced in operating a construction company around September 2006, recommended the entry of Nonindicted Co. 1.

③ Meanwhile, at the end of July 2006 and around August, 2006, Defendant 1 told Nonindicted Co. 5, who had been working for Nonindicted Co. 4, who had been aware of his membership from Nonindicted Co. 2, to the effect that “it would be sold by Nonindicted Co. 1, which he would have been aware of his legal administrator.” At the same time, Nonindicted Co. 5 had already heard the lawsuit that Nonindicted Co. 1 would be sold by Nonindicted Co. 1, and had an interest in it. Nonindicted Co. 5 requested Defendant 1 to “a request to the said Defendant for a statutory administrator.”

④ After having heard these stories from Defendant 1, Nonindicted 5 sent a review report on the acquisition of Nonindicted Co. 1 to Defendant 2, Nonindicted Co. 13, Nonindicted Co. 14, etc. in Busan, who worked as the chief of ○○○ Group Investment Company in August 2006.

⑤ Around September 2006, Nonindicted 5 was notified by Defendant 2 of his intention to promote the acquisition of Nonindicted Company 1 in ○○○ Group. At that time, Nonindicted 5 met with Defendant 1, and Nonindicted 5 told that “The sale of Nonindicted 2 is publicly announced, and the preferential bidder will be selected.” On the same page, Nonindicted 5 heard from Defendant 1 that “I will make a public announcement of the sale of Nonindicted Company 1, but will recommend the ○○○ Group as an assignee.” On October 2006, Nonindicted 5 told Nonindicted 2, Nonindicted 8, and Defendant 1 that “I will recommend the ○○ Group as an assignee.” After informing Defendant 2 of this fact, Nonindicted 5 advertisedd Defendant 2, Nonindicted 1 at the time, and the auditor of Nonindicted Company 1, and Defendant 1.”

(6) On the other hand, around August 15, 2006, the Changwon District Court, a major shareholder of the non-indicted 1 Company, dismissed the application for the abolition of the company reorganization procedure of the non-indicted 1 Company, and actively promoted the sale procedure of the non-indicted 1 Company. On September 27, 2006, the liquidation court selected the law firm, the Pacific and Durro Jin Accounting Corporation as the sales main agent for the sale of the non-indicted 1 Company. At the time of the sale, the materials on the non-indicted 1 Company prepared and distributed by the above sale main agent were sold a building site, and promoted the fact that the non-indicted 1 Company has cash assets and

7) As above, Nonindicted 2 made efforts to ensure that the liquidation court actively promoted the sale of Nonindicted Company 1, as well as officers’ participation in the acquisition procedure to the extent possible through the board of directors’ meetings, etc., and made efforts to actively promote the public relations of Nonindicted Company 1.

④ On the other hand, Defendant 1, with the permission of the reorganization court on October 18, 2006, assumed office as a director of Nonindicted Co. 1 with the permission of the reorganization court, was in charge of resolving disputes related to the construction rights with Nonindicted Co. 3 while working at the head office Msan.

9) The sales procedure for Nonindicted Co. 1 was promoted through the consultation between the sales agent and the reorganization court while participating in only the small number of Nonindicted Co. 1’s Seoul office, including Nonindicted Co. 2 and 8, and maintaining security.

(10) After the public notice of sale on November 14, 2006, on the 28th of the same month, 17 companies, including Nonindicted Co. 6 Co., Ltd., submitted a letter of intent to accept. From November 30, 2006 to December 7, 2006, the consortium Co., Ltd. and the consortium Co. 6 Co., Ltd. participated in the bidding on December 20, 2006. The consortium of Nonindicted Co. 6 submitted a letter of intent to subscribe to KRW 336,374,205,80 to the consortium of Nonindicted Co. 14 Co., Ltd., Ltd., and concluded a bid agreement with Nonindicted Co. 14 on December 21, 2006 with Nonindicted Co. 36,374,205,80, and on December 26, 2006, the consortium of Nonindicted Co. 6 Co. 16, 2006.

① On the other hand, around December 13, 2006, Nonindicted Co. 6 established Nonindicted Co. 7 as a document company for acquiring Nonindicted Co. 1. Nonindicted Co. 7 acquired approximately 56.62% of the shares issued by Nonindicted Co. 1 through new shares acquisition (or approximately 62.9% of the shares acquired by Nonindicted Co. 16, Nonindicted Co. 17, and Nonindicted Co. 18, if the shares acquired by it were combined) from among the shares issued by Nonindicted Co. 1 through the new shares acquisition on January 31, 2007. On the other hand, on the other hand, between January 18, 2007 and December 25, 2007, Nonindicted Co. 1,784,665 shares owned by the minority shareholders of Nonindicted Co. 1, Ltd. (6,500 won per share), and on the other hand, on February 5, 2007, the court agreed to additionally purchase the shares from Nonindicted Co. 15,53840,708.

(12) At that time, Defendant 2, who was the representative director of Nonindicted Co. 7 at the time, recommended Nonindicted Co. 7 to purchase shares of KRW 8,000 per share, which is a higher price than the value of the shares additionally offered for minority shareholders, and requested the introduction to enable Defendant 1 to purchase shares of KRW 250,00 per share, which is the value of the shares additionally offered for minority shareholders. However, there was no shares acquired through Defendant 1’s introduction thereafter.

(13) On the other hand, on January 2007, Defendant 1 reported the progress of the consultation with Defendant 2 to Defendant 2 while meeting for the first time. On February 5, 2007, Nonindicted Co. 1 agreed to purchase 30% of the cement volume required for the said construction from Nonindicted Co. 20, by Defendant 1’s effort, between Nonindicted Co. 3 and Nonindicted Co. 3 on February 5, 2007.

4) As of February 9, 2007, Defendant 2 prepared a written agreement on management consulting that pays KRW 1,289,427,500 in return for Defendant 1’s offering of data and information and consultation on acquisition of additional stocks of Nonindicted Incorporated Company 1, providing management strategies, etc. to enhance corporate competitiveness, and providing other necessary information and consultation related to corporate management, etc., and paid KRW 1,937,777,500 in total from April 20 to August 24, 2007.

(B) Determination

① Whether Defendant 1 gave help to select Nonindicted Co. 7 as a priority bidder

In light of the aforementioned facts and the following circumstances, (a) at the time of Defendant 1’s speech as to the disclosure and sale of Nonindicted Co. 1’s shares at the end of or around July 2006, Nonindicted Co. 1 was not in the position of managing Nonindicted Co. 1’s affairs as a director before he was appointed as a director of Nonindicted Co. 1 ( October 18, 2006). After Defendant 1 was appointed as a director, only the negotiation with Nonindicted Co. 3 was working at the head office after he was appointed as a director, and it was entirely impossible to know that Nonindicted Co. 1 could not participate in the sales procedure due to his involvement in only the number of employees such as Nonindicted Co. 2 and Nonindicted Co. 8 at the Seoul office. The fact that Nonindicted Co. 1 was expected to open to the public or was holding about KRW 17 billion at the end of July 2006, it is difficult to view that Nonindicted Co. 1 was widely known that Nonindicted Co. 1’s sales of the factory site was in violation of one’s duty.

In addition, according to the records, Defendant 2’s legitimacy of absorbing Nonindicted Co. 6’s absorption of Nonindicted Co. 1’s company’s construction business sector is acknowledged. However, Defendant 2, who is in the position of controlling the takeover of Nonindicted Co. 1’s construction business sector, can make the above misappropriation to Defendant 1, who is the responsible manager of Nonindicted Co. 1’s construction business sector. Thus, it cannot be deemed that Defendant 1 made an illegal solicitation with respect to Defendant 1’s duties, and otherwise, there is no evidence to prove that Defendant 1 provided internal information on Nonindicted Co. 7’s attitude toward the acquiring company, such as external debt, internal management situation, and labor union, etc., of Nonindicted Co. 1, which was unnecessary for the success of M&A with illegal solicitation.

② Requests for “to present materials and information so that Nonindicted Co. 7 may purchase the shares of Nonindicted Co. 1.”

On February 2, 2007, Defendant 2 decided to purchase shares of the minority shareholders in addition to 8,000 won which is the higher price than 6,500 won of the shares publicly purchased from the minority shareholders by the recommendation of the reorganization court. Defendant 2, upon the introduction of Defendant 1, has obtained 250,00 shares from the non-indicted 19. The fact that Defendant 1 introduced them to allow them to purchase shares of the minority shareholders and requested them to purchase shares of the minority shareholders.

The director's duty includes the duty to perform business in a fair manner so that the interests of the minority shareholders may not be unfairly infringed or reduced by the controlling shareholder. However, in light of the circumstance and process when Defendant 2 asked Defendant 1 to arrange for the purchase of shares with respect to the purchase of shares, it is difficult to recognize that Defendant 2 attempted to purchase the minority shareholders for the purpose of attracting minority shareholders. In addition, in light of the fact that the transaction relationship with the minority shareholders is formed between the seller and the buyer through autonomous negotiations, it cannot be concluded that the trade relationship between the minority shareholders and the non-indicted 7 corporation, a controlling shareholder, is a trade conflict of interest between the minority shareholders, and thus, the above request cannot be seen as an illegal solicitation.

③ Requests to act in favor of Nonindicted Co. 7 in the future.

It is difficult to view that the facts charged are specified due to the uncertainty of the content of the “act to be beneficial to Nonindicted Co. 7 even after the future,” as properly stated by the lower court.

In the case of a merger and acquisition of a company, there are many cases where there is a conflict of interests between the acquiring company and the acquiring company. In such a situation, when Defendant 1, who is a director of Nonindicted Co. 1, the acquiring company, bears a duty not to engage in the competitive business, receives large amounts of money in return for providing management consulting, etc. to Nonindicted Co. 7, the acquiring company, as a result of the public prosecutor’s assertion that the receipt of money in return for an illegal solicitation is in return for an illegal solicitation, as seen earlier, insofar as it is difficult to recognize that there was an illegal solicitation, requesting the director of Nonindicted Co. 1 to engage in the activities beneficial to Nonindicted Co. 7, it is difficult to interpret it as the meaning of requesting the non-indicted Co. 1 to engage in the acts disadvantageous to the non-indicted Co. 1, because it

④ On the other hand, the prosecutor asserts that Nonindicted 2 received a total of KRW 480,000,000 from Nonindicted 2 as retirement allowances and contingent fees due to merger, and Nonindicted 8 received approximately KRW 160,000,000 from the auditor. On the other hand, Defendant 1 received a large amount of KRW 1,93,000,000 from Defendant 2, it should be deemed that there was an implied illegal solicitation regarding the acquisition of Nonindicted 1 Company.

However, as seen earlier, it is difficult to recognize that there was an illegal solicitation with respect to the receipt and payment of the above money in the instant case. Considering the circumstances that the court below held on this part even if the above amount is large, it is difficult to recognize that there was an "illegal solicitation" because the fact of receipt and payment of money does not presume the existence of any illegal solicitation with respect to the acquisition and merger of non-indicted 1 corporation, nor does there have been any objective circumstance to support the existence of such illegal solicitation on the record.

⑤ In addition, even if all the evidence presented by the prosecutor as properly explained by the court below are comprehensive, it is not sufficient to recognize that Defendant 3 conspiredd with Defendant 2 on the evidence of breach of trust with Defendant 2, and there is no other evidence to acknowledge it.

Therefore, this part of the prosecutor's argument is without merit.

(2) As to Defendant 2 and 3's violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation)

(A) Summary of the facts charged

Defendant 2 reserved the level of KRW 170 billion in cash available as part of the proceeds from the sale of Masan-si grain site to Nonindicted Co. 1, and obtained in advance the information that the open sale of the cash would soon be made to Nonindicted Co. 1, and also was proposed by ○○ Group to help acquire Nonindicted Co. 1. Although it was not sufficient funds to acquire Nonindicted Co. 1, a large company with approximately KRW 374.5 billion in the size of its assets, Defendant 2 was in the state that Nonindicted Co. 6 did not have sufficient funds to acquire Nonindicted Co. 1, a large company with KRW 374.5 billion in the size of its assets, Defendant 3, along with Defendant 3, raised funds necessary for the acquisition of Nonindicted Co. 1, a merger with Nonindicted Co. 1, after acquiring Nonindicted Co. 1’s cash assets through external loans, and planned to use the cash assets of Nonindicted Co. 1.

In other words, Defendant 3, along with Defendant 2, established Nonindicted Co. 7, a document-based company (SPC), and provided the assets of Nonindicted Co. 1, which were reserved in Nonindicted Co. 1, the acquired company, as security, including approximately KRW 170 billion of cash assets and funds to be invested as new acquisition funds, to Nonindicted Co. 1, the acquired company, and provided considerable amount of the acquisition funds from financial institutions such as Korea Development Bank in the name of Nonindicted Co. 7. The remainder raised funds necessary for acquiring Nonindicted Co. 1’s acquisition with the funds of ○○ Group’s affiliates such as Nonindicted Co. 6, etc., and then, Defendant 3, using the money, planned to take over the management rights and major shareholders of Nonindicted Co. 1 through Nonindicted Co. 7 by acquiring the stocks of Nonindicted Co. 1’s company through the acquisition of Nonindicted Co. 1’s assets and to pay the above acquisition obligations of Nonindicted Co. 1 to Nonindicted Co. 1.

Accordingly, on December 13, 2006, Defendant 3 established Nonindicted Co. 7, a document company, around December 13, 2006, and appointed Defendant 2 as the representative director, and thereafter, Defendant 7 participated in the open sale of Nonindicted Co. 1 Co. 26 of the same month and acquired the status of the preferred bidder on the condition that Nonindicted Co. 7 will acquire the new shares and debentures of Nonindicted Co. 1 in KRW 500,228,641,90.

In particular, even though Defendant 2 was ultimately planned in advance to merge Nonindicted Co. 1 for the repayment of loans as above, around January 30, 2007, he entered into an agreement on continuous business maintenance, etc. of Nonindicted Co. 2 and Nonindicted Co. 1 Co. 21 and 22 on the legal administrator of Nonindicted Co. 1’s legal administrator of Nonindicted Co. 2 and the chairman of Non-Indicted. 1’s Trade Union, and for five years, the agreement on continuous business maintenance, etc. of the non-Indicted. 1’s new stocks acquired by Nonindicted Co. 7 Co. 1, and submitted it to the 11st private company register, which is undergoing corporate reorganization procedures for Nonindicted Co. 1.

Meanwhile, Defendant 2, following the Supreme Court’s decision that “The acquisition of the acquired company’s assets as security without any consideration constitutes a crime of breach of trust in the process of acquiring the acquired company’s assets,” Defendant 2, who was selected as the priority negotiation subject to the preferential negotiation and had proceeded with the Korea Development Bank and the acquisition price loan negotiation.” In this process, Defendant 2, based on the Supreme Court’s decision that “the acquisition of the acquired company’s assets as security, is impossible

As a result, Defendant 2 provided the assets of Nonindicted Co. 7 and ○○ Group affiliate companies as collateral and raised the acquisition fund with the joint and several sureties of Nonindicted Co. 6, and revised the existing “H Pro rata” plan to merge Nonindicted Co. 7 with Nonindicted Co. 1 and redeem the acquisition fund again, such as the initial “H pro rata” plan.

After that, Defendant 2 paid approximately KRW 300,228,641,90 as the purchase price of new shares of Nonindicted Co. 1 by the third party in accordance with the third party allocation method in order to raise the acquisition fund with the conclusion of the acquisition contract of Nonindicted Co. 1 on January 31, 2007, the sum of KRW 170 billion out of KRW 46.7 billion borrowed under the name of Nonindicted Co. 7, a document-based company, including the Korea Development Bank, and KRW 130.2 billion out of KRW 50 billion of corporate bonds issued by Nonindicted Co. 6, and KRW 130.6% of the total amount of KRW 50 billion of corporate bonds issued by Nonindicted Co. 2, 200, Defendant 2 acquired the status of major shareholders by securing approximately 62.6%

In addition, around February 6, 2007, Defendant 3 transferred KRW 170 billion of short-term cash assets previously held in Nonindicted Co. 1 Company to Nonindicted Co. 7’s regular director (registration director) who is the regular director of the Financial Headquarters of Nonindicted Co. 6 in order to use them to repay the loans of Nonindicted Co. 7’s financial institutions through Defendant 2, and at the same time, he transferred Nonindicted Co. 23, who is the regular director of the Financial Headquarters of Nonindicted Co. 6, to Nonindicted Co. 1 Company to the managing director (registration director). On the same day, Defendant 2, Nonindicted 24, and 25, etc. were registered as director of the said Nonindicted Co. 1 Company, and the management right against Nonindicted Co. 1, who is the former representative director of Nonindicted Co. 26, the ○○ Group Company, as representative director

On the other hand, Defendant 2 agreed to deliver KRW 2.1 billion to Defendant 1 in preparation for a merger with Nonindicted Co. 1 in preparation for an illegal solicitation with Defendant 3 upon obtaining a comprehensive consent from Defendant 3 on February 9, 2007, and accordingly, delivered KRW 1,937,777,500 in total from April 20 to August 24, 2007.

After that, on September 207, Defendant 2 prepared for the merger between Nonindicted Co. 1 and Nonindicted Co. 7, as seen above, entered into an internal conclusion that the merger between Nonindicted Co. 1 and Nonindicted Co. 7 takes place with regard to the control rate, taxes, etc. of ○○ Group’s Nonindicted Co. 1, and subsequently revised the plan to merge Nonindicted Co. 6 with Nonindicted Co. 7 and Nonindicted Co. 1 in a successive manner. However, after the merger of Nonindicted Co. 1 Co. 1, Defendant 2 tried to divide the textile sector, the only business sector of Nonindicted Co. 1 Co. 6 Co. 1, which remains until that time, to divide the business risk, and tried to review and plan internally the plan to divide the business risk.

Since the economic purpose of corporate mergers is to rationalize the management and improve financial structure through corporate mergers, the director of the non-indicted 1 corporation and the non-indicted 1 corporation in deciding the mergers with other corporations shall closely examine whether the merger could have a productive and positive effect, economic benefits, and losses due to the merger. On the other hand, the board of directors or the general meeting of shareholders shall determine the merger through sufficient discussions and resolution procedures to ensure that the merger does not cause property damage to the company, and shall appropriately manage and preserve the company's assets.

However, as of December 31, 2007, around the time immediately before the merger, the assets of Nonindicted Co. 1 were approximately KRW 468.1 billion, the liabilities were approximately KRW 33.1 billion, while the capital was about KRW 43.7 billion, the assets of Nonindicted Co. 6 at the same time were approximately KRW 1.67 billion, the liabilities were approximately KRW 73.5 billion, and the capital was approximately KRW 332 billion, taking into account the debt ratio, etc., the financial structure of Nonindicted Co. 1 was much more solid, and in particular, it was not impossible or considerably difficult to continue to operate the existing business as it is as it is, and there was no need for management immediately after the merger of Nonindicted Co. 1 with the bad corporate management rights for Nonindicted Co. 1.

Nevertheless, Defendant 3, with cash assets reserved in Nonindicted Co. 1, operated the meeting minutes of the board of directors in accordance with the schedule of the merger plan prepared in advance by Defendant 2 and Nonindicted Co. 6, including Defendant 3, under the substantial influence of the ○○○ Group’s highest decision-making authority, in order to have the Nonindicted Co. 1 merged with the assets reserved in Nonindicted Co. 7, in order to repay the debt of Nonindicted Co. 7, as they were carried out as they were. On the same day, the board of directors of Nonindicted Co. 1, even though the directors, including Defendant 3, did not actually attend the meeting and passed a resolution for the merger on a unanimous basis. On the same day, the board of directors of Nonindicted Co. 1, even though Defendant 2 did not actually attend the meeting and there was no debate and decision-making on the necessity of the merger between the directors, prepared a formal meeting minutes of the board of directors to resolve the merger with Nonindicted Co. 6 Co. 6, Feb. 29, 2008.

On May 13, 2008, Defendant 2 had Nonindicted Co. 6 withdraw the total amount of KRW 180 billion possessed by Nonindicted Co. 1 in short-term financial instruments, etc. and used it to repay the loan obligations from the Korea Development Bank, etc.

Accordingly, Nonindicted Co. 6 merged Nonindicted Co. 1 and, at the same time, Nonindicted Co. 1 took advantage of cash assets in which Nonindicted Co. 1 previously possessed, repaid the total amount of loans that he borrowed from financial institutions as above.

In the end, Defendant 3, the highest decision-making authority of ○○○ Group, merely as a director of Nonindicted Co. 1 in the process of acquiring and merging Nonindicted Co. 1 and his shareholder. If Nonindicted Co. 1 becomes the object of acquisition and merger of another Co. 1, he endeavors to maintain the soundness of the assets of Nonindicted Co. 1 to the maximum extent possible. During that process, in collusion with Defendant 2 and Nonindicted Co. 1 Co. 23 and the representative director of Nonindicted Co. 1, who has occupational duties such as performing duties, with the duty of due care as a good manager to protect the maximum benefits of the Nonindicted Co. 1 and shareholders, in order to use the cash assets of Nonindicted Co. 1 in the process of acquiring the stocks of Nonindicted Co. 1, the financial structure of which was more solid than that of Nonindicted Co. 6 Co. 1, which was relatively poor than that of Nonindicted Co. 1, and the prosecutor of the lower court reported partial correction of the amount of damages and profits generated from the merger and modification of the indictment.

(B) Facts of recognition

According to the records, the following facts can be acknowledged.

① At the end of July, 2006 and around August, 2006, Nonindicted Co. 5 (hereinafter “Nonindicted Co. 5”) heard from Defendant 1 that Nonindicted Co. 1 would be sold, and on August 17, 2006, established a document-based company (SPC). After acquiring the assets of Nonindicted Co. 6, Nonindicted Co. 5 (hereinafter “Nonindicted Co. 5”) from Nonindicted Co. 1’s acquisition of the assets of Nonindicted Co. 1 and taking over the assets of Nonindicted Co. 1’s company as collateral, and presented a draft plan to Defendant 2 on August 17, 2006.

② At the time, ○○ Group actively promoted the acquisition and merger of companies in order to secure new growth engines through the advancement of new projects by centering on the Korea Investment Business Headquarters. At the time, Defendant 2, the head of the Korea Investment Business Headquarters, examined the said plan and expressed his intent to promote Nonindicted 5’s acquisition of Nonindicted 1 Company on September 2006.

③ On September 27, 2006, when the Changwon District Court, which was the cause of reorganization law, selected a weekly company for the sale of Nonindicted Company 1, the ○○ Group, based on Defendant 2, determined that the construction sector of Nonindicted Company 1, the leisure business sector, and the business division, which is the subsidiary, could have a collapse effect due to the link with the business sector of Nonindicted Company 6, and decided to take over Nonindicted Company 1 in full consideration of the fact that there are many real estates available to Nonindicted Company 1. On November 14, 2006, the liquidation court concluded a consulting service agreement on the acquisition of Nonindicted Company 4 and Nonindicted Company 1 on November 20, 2006.

④ On November 28, 2006, 17 companies, including Nonindicted Co. 6’s consortium, submitted the letter of intent to accept. Meanwhile, Nonindicted Co. 6 established Nonindicted Co. 7, a document-based company to acquire Nonindicted Co. 1 by investing KRW 50 million around December 13, 2006.

⑤ On December 20, 2006, only the consortium Co. 6 and Nonindicted Co. 14 Co. 6 participated in the bidding. Nonindicted Co. 6 Co. 1 and the consortium concluded a memorandum of understanding with Nonindicted Co. 1 on December 26, 2006, the consortium submitted a bidding letter with the content that Non-Indicted Co. 1’s new shares and corporate bonds issued by Non-Indicted. 1 were acquired in KRW 500,228,641,90, and Non-Indicted. 14 Co. 205, the consortium submitted a bidding letter with the content that Non-Indicted. 14 Co. 36,374,205,80.

④ Meanwhile, at the time of Nonindicted Co. 6’s selection of the consortium, Nonindicted Co. 6 as the head of Nonindicted Co. 6’s financial team, Nonindicted Co. 23, who was working as the head of the financial team of Nonindicted Co. 6, was instructed by Defendant 2 through Nonindicted Co. 29, to find out the possibility of funding for Nonindicted Co. 1’s acquisition of Nonindicted Co. 2 in the financial institution, and contacted with the Korea Development Bank at that time. Nonindicted Co. 23 presented a proposal to borrow the acquisition price of Nonindicted Co. 1’s assets as collateral in accordance with the existing plan to repay the acquisition price to the said assets. However, Nonindicted Co. 30, a person in charge of

④ Defendant 2, etc., upon receiving such a report from Nonindicted 23, revised a plan to borrow money for acquiring the assets of Nonindicted Company 6 and ○○ Group’s affiliates as collateral on January 30, 2007, and subsequently received a loan of KRW 466.7 billion (the amount of loan agreement is KRW 472.5 billion) from the Korea Development Bank, Korea Bank, Korea Bank, Busan Capital, and National Federation of Fisheries Cooperatives as joint owner on January 30, 207. As security of the loan, Defendant 2, etc., upon receiving a loan of KRW 46.7 billion (the amount of loan agreement is KRW 472.5 billion) from Nonindicted Company 6’s stocks (the amount is KRW 5.00 common stocks) held by Nonindicted Company 6 and KRW 20 million, Nonindicted Company 7, 17, and 18, etc., to whom they will take over at least 17.05 billion,000 won, and concluded a joint and several surety agreement with Nonindicted Company 1 and 2.700 billion won.

8) According to a loan agreement that was concluded at the time, loans KRW 200 billion (loan A) as corporate debenture acquisition price; loans KRW 170 billion as loan acquisition price; loans KRW 37.5 billion as loan interest and fees; and loans KRW 37.5 billion as payment for the acquisition of new shares; and loans KRW 65 billion as payment for the acquisition of Nonindicted Co. 1’s shares; and loans KRW 65.0 billion as additional purchase price for the stocks of Nonindicted Co. 1. In relation to the maturity of loans, loans are repaid in full on the date which comes first three months from the date of the first withdrawal of the loans; or one month from the date when the reorganization proceedings of Nonindicted Co. 1 were concluded; and the remainder of loans will arrive first on the date when the first withdrawal date of the first withdrawal of the loans that were first withdrawn; or on the date when the merger registration of the borrower and the liquidation company came first on the date when the merger registration is completed.

① Around the end of January 2007, Nonindicted Co. 7 entered into an investment contract with Nonindicted Co. 1 to acquire Nonindicted Co. 1 by paying KRW 300,228,641,900 with the subscription price for new shares, and KRW 200 billion with the subscription price for new shares. On the same day, Nonindicted Co. 7 entered into an investment contract with Nonindicted Co. 1 on January 30, 2007 with the content that Nonindicted Co. 1 would not retire the shares of Nonindicted Co. 1’s new shares and the subscription price for new shares. On the same day, Nonindicted Co. 21,22 and workers’ employment for five years, who are the chairperson of Nonindicted Co. 1’s labor union, guarantee employment, during the employment guarantee period, and prepare an agreement on the “employment Guarantee and Continuous Employment Maintenance” with the content that Nonindicted Co. 1 will not retire the shares of Nonindicted Co. 1’s new shares and the shares offered for tender offer.

① On January 31, 2007, Nonindicted Co. 7 acquired approximately 56.62% of the shares issued by Nonindicted Co. 1 (in the case of the combination of shares acquired by Nonindicted Co. 16 Co. 16, etc., the ratio is about 62.9%) from among the shares issued by Nonindicted Co. 1 through the new shares subscription. Before that, between January 18, 2007 and January 25, 2007, the tender offer was made for 1,784,665 shares (6,50 shares per share) held by minority shareholders of Nonindicted Co. 1, and around February 5, 2007, the aforementioned Nonindicted Co. 15 agreed to purchase 5,83,490 shares ( KRW 8,00 per share) from the minority shareholders of the same month from February 6, 2007 to 7, 2008, and actually purchased approximately 482,7808 shares issued by Nonindicted Co. 1900 shares.

① Nonindicted Co. 1 received a decision on the completion of the company reorganization procedure from the reorganization court on February 7, 2007, and on February 15, 2007, Nonindicted Co. 7 repaid to Nonindicted Co. 7 Co. 20 billion won the corporate bonds acquired on January 31, 2007, and Nonindicted Co. 7 repaid the above KRW 200 billion to the Korea Development Bank in accordance with the above loan agreement.

(12) On February 6, 2007, Nonindicted 27, and 24 were appointed as the representative director of Nonindicted 1 Stock Company, and Nonindicted 23, 25, and Defendant 2, etc. were each appointed as the directors and the auditor by Nonindicted 29.

(13) After Non-Indicted 27 assumed office as the representative director of Non-Indicted 1 Company, Non-Indicted 1 Company established ○○○○○○○ Shipbuilding as part of the restructuring. The construction sector of Non-Indicted 1 Company was integrated into the construction business sector of Non-Indicted 6 Company.

4) On August 2007, in order to prepare for the merger between Nonindicted Co. 1 and Nonindicted Co. 7 in accordance with the terms and conditions of the loan for the first time, Nonindicted Co. 23 requested the Han Young Accounting Corporation to review the detailed procedures and methods regarding the merger. However, on September 207, when the merger between Nonindicted Co. 1 and Nonindicted Co. 7 was conducted from the Han Young Accounting Corporation in accordance with its original plan, Nonindicted Co. 23 received advice from ○○○ Group’s control rate and tax, etc., and reported these contents to Defendant 2, etc. The relationship between Defendant 2 and Nonindicted Co. 1’s representative director at the time and Nonindicted Co. 1, 28, 23, etc. had many external problems, such as the organization, business activity, etc. of Nonindicted Co. 1, and the merger between Nonindicted Co. 1 and Nonindicted Co. 2, who was aware that there was a problem in the merger between Nonindicted Co. 1 and Nonindicted Co. 1, 2007, in order to resolve the problems of the merger.

(15) On December 24, 2007, when the board of directors was held while some of the directors of non-indicted 6 corporation, including defendant 2 and 3, did not attend, and a merger resolution was passed. On February 21, 2008, February 29, 2008, and March 14, 2008, the board of directors held on the order of February 14, 2008, passed a resolution to finally approve the merger agreement at the meeting of the board of directors held on April 8, 2008. Meanwhile, the board of directors of non-indicted 1 corporation, which was held on December 24, 2007, passed a resolution to merge with non-indicted 6 corporation, and approved the merger at the general meeting of shareholders held on April 8, 2008. The non-indicted 6 corporation merged with non-indicted 6 corporation on February 29, 2008 and merged with the non-indicted 6 corporation on May 13, 2008.

On May 13, 2008, Nonindicted Co. 6 paid all the balance of the acquisition price that remains at KRW 266.7 billion in total, including the cash amount of KRW 180 billion held by Nonindicted Co. 1 and KRW 86.7 billion in cash held by Nonindicted Co. 6.

Meanwhile, Nonindicted Co. 6 established a separate corporation of Nonindicted Co. 1 on May 20, 2008, following the merger of Nonindicted Co. 1 and the need for management to prevent the use of the trade name of Nonindicted Co. 1’s third party.

Nonindicted Co. 6 maintained the existing business division of Nonindicted Co. 1 and succeeded to the employment relationship as it is, except for a person who voluntarily retired.

(C) Determination

In addition to the details and process of the acquisition and merger of Nonindicted Co. 6 Company 1, as well as the circumstances after the merger, the early repayment of the acquisition price of corporate bonds cannot be deemed unlawful or unjust, as the court below properly explained, and the merger of this case is difficult to be deemed to be contrary to the purport of the agreement on employment security, etc., it is difficult to recognize that Nonindicted Co. 6 acquired and merged Nonindicted Co. 1 Company with the intent to acquire and manage the cash assets of KRW 170 billion, which were in the Nonindicted Co. 1 Company, for the purpose of repaying the acquisition and the loan with the cash assets of KRW 170,000,000, which were in the Nonindicted Co. 1

In addition, the motive for the merger of this case can be acknowledged that some of the non-indicted 1 corporation's intent to pay for the acquisition price of the assets held by the non-indicted 6 corporation is included in the acquisition price of the assets. However, as seen above, the loan provided as collateral for the assets of the non-indicted 6 corporation and the acquisition price of the total amount of KRW 130 billion invested by some affiliates of the ○○ Group including the non-indicted 6 corporation and the acquisition price of the non-indicted 1 corporation is different from the LBO method accepting the assets of the acquired company as collateral and its basic premise. Furthermore, there are systems that can be protected by shareholders or creditors against the merger through the nature and effect of the merger, the merger ratio under the Commercial Act, the special resolution of the general meeting of shareholders, the appraisal right of shareholders opposing the merger, the creditor protection procedure, etc. There is some defects in the corporate nature of the merger of this case, but the board of directors was held more than four times and resolution related to the merger of this case, and there is no unlawful or unlawful evidence that the merger of this case cannot be deemed as invalid or unlawful.

Therefore, the prosecutor's assertion on this part is without merit.

(3) As to Defendant 2's violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement)

The court below found Defendant 2 not guilty on the ground that it is difficult to recognize that Defendant 2 paid KRW 650 million to Defendant 1 in accordance with the intention of Nonindicted Incorporated Company 6, and KRW 365 million to three (31), etc. for retired officers of Nonindicted Incorporated Company 11, Nonindicted Incorporated Company 31, etc. paid to three (3) persons, etc., such as Nonindicted Incorporated Company 31, etc., was paid as an intention of unlawful acquisition. In light of the records, the prosecutor’s assertion on this part is just and acceptable.

C. Defendant 2 and prosecutor’s assertion of unreasonable sentencing

It is recognized that the amount of embezzlement reaches approximately KRW 140 million.

However, in full view of the following circumstances: (a) Defendant 2 appears to have no personal gain due to the crime of occupational embezzlement of this case; (b) there are some circumstances such as the process of raising extra funds and the place of use; (c) there is no history of punishment for the same crime; and (d) other various circumstances, such as the Defendant’s age, motive and circumstance of the crime; (b) the means and consequence of the crime; and (c) the sentencing conditions indicated in the record, such as the circumstances after the crime, are adequate; and (d) it cannot be deemed that the Defendant and the Prosecutor’s allegation in this part is too heavy

3. Conclusion

Therefore, the appeal against the defendants by the defendant 2 and the prosecutor against the defendants is dismissed in accordance with Article 364 (4) of the Criminal Procedure Act as it is without merit. It is so decided as per Disposition.

Judges Kim Shin (Presiding Judge)