[비즈한국] At 2 PM today, a substantive warrant review will be held for Brian Kim, the Chairman of Kakao's035720 Management Reinvention Committee, who is accused of violating the Capital Markets Act. Given that such warrant reviews typically last at least 2 to 3 hours, the results are expected to be announced after midnight.
Legal experts view the probability of the arrest warrant being issued as a '50-50' toss-up. The prosecution is highly confident, claiming that the 'evidence is overflowing,' but there is also a possibility that the warrant could be dismissed because Kakao has been actively preparing for the prosecution's investigation. In fact, since late last year, Kakao has launched a Compliance and Trust Committee, adopting a model similar to the one used by Samsung Electronics005930 Chairman Lee Jae-yong to prepare for his own arrest warrants. Some predict that if Kakao's response strategy—which kept the possibility of an arrest warrant in mind—proves effective, the judge might conclude that it is acceptable for him to stand trial without being detained.
"Direct evidence is sufficient," the prosecution's confidence
Brian Kim, Chairman of Kakao's Management Reinvention Committee, is accused of violating the Capital Markets Act by intervening in stock manipulation during the acquisition of SM Entertainment last February. He allegedly funneled approximately 240 billion won to inflate SM Entertainment's share price above the 120,000 won tender offer price set by its competitor, HYBE, with the intention of obstructing HYBE's acquisition. He also faces charges of violating disclosure obligations by failing to report to financial authorities that he and the private equity fund Won Asia Partners held more than 5% of SM Entertainment's shares.
Inside and outside the prosecution, the consensus is that 'the evidence is sufficient.' The sentiment is that the prosecution requested the arrest warrant slowly only to be cautious, not because the investigation was lacking. The prosecution's strategy is to explain to the court that the stock manipulation was approved at the Kakao Investment Committee, in which Chairman Kim and former Kakao Chief Investment Officer Bae Jae-hyun (currently detained) participated. During the ongoing trial of former CIO Bae and an official named Ji from Won Asia Partners, Lee Jun-ho, head of the Investment Strategy Division at Kakao Entertainment, testified as a witness that "Bae said he received confirmation from Brian (Chairman Kim)."
In this regard, a legal professional who has participated in the prosecution's investigation stated, "The atmosphere at the prosecution is unique," adding, "There is a strong sentiment that the evidence related to the investigation is overflowing. They are confident." It has even been suggested that the prosecution requested the warrant with the expectation that it would be issued because there is sufficient direct evidence, beyond mere statements, to prove that the relevant orders were exchanged.
On the other hand, ahead of the warrant review, Chairman Brian Kim held an emergency group council on the 18th with CEOs of major affiliates under the CA Council and clarified, "The (stock manipulation) allegations are not true," and "I have never ordered or tolerated any illegal activities." He has previously maintained that while it is true he received reports and approved the acquisition of SM Entertainment, he was not briefed on the specific methods used for the acquisition.
The first hurdle for the prosecution: 'Kakao's response'
Can the prosecution overcome Chairman Brian Kim, who claims the allegations are groundless? Legal experts point to Kakao's 'Compliance and Trust Committee' as the most critical factor the prosecution—which insists it has 'certain evidence'—must overcome to get the arrest warrant issued. As the investigations by the Financial Supervisory Service and the prosecution intensified, Kakao established an external oversight body, the Compliance and Trust Committee (Compliance Committee), and appointed former Supreme Court Justice Kim So-young as its chair to manage risks.
This move is seen as mimicking the 'Samsung Compliance Committee,' an external compliance supervision body established strategically by Samsung to mitigate risks in Chairman Lee Jae-yong's trial. Similarities include the intent to address legal risks and the appointment of a former Supreme Court Justice as the inaugural chair. This is why some speculate that if Chairman Brian Kim argues that he recognized a 'lack of internal systems' and 'established a system to compensate for it,' the court might view the incident as a one-time mistake and dismiss the warrant.
Conversely, the prosecution needs to go beyond simply claiming they have "secured key evidence"; they must prove just how haphazard Kakao's management system was and point out the limitations of the 'Compliance Committee model' to succeed.
The second hurdle for the prosecution: 'No flight risk'
Even if the prosecution proves, based on evidence, that Chairman Brian Kim was the final authority for approving the stock manipulation, there is a significant possibility that the judge will dismiss the warrant.
Judges consistently explain that they feel increasingly burdened by the prospect of detaining 'heads of large conglomerates.' In particular, if there is even the slightest room for dispute, they feel 'more at ease' leaving the leader of a major company that significantly impacts the Korean economy on non-detained status. They explain that the long-standing adage of criminal trials—'if there is no conviction of guilt, it is innocence'—is also reflected in warrant reviews.
One judge predicted, "If a conglomerate head embezzled company funds, it would be an easy decision to issue a warrant, but issuing one over decisions made during the management process is a different matter," adding, "Since they have a clear identity and there is no risk of flight, if the judge sees even the slightest room for dispute, they could dismiss it."
However, there is also talk that even if the warrant is dismissed, the prosecution could request another one. A lawyer who participated in the prosecution's investigation hinted, "The prosecution's determination that there was an order from Chairman Brian Kim is so firm that there is already talk that even if the warrant is dismissed, the prosecution could file for another one after supplementary investigations."