[비즈한국] The legal community is in an uproar as the prosecution decided not to appeal the court ruling regarding private developers in the Daejang-dong case. In particular, there is much debate surrounding the charge of 'breach of trust.' The crime of breach of trust, which the ruling party is currently seeking to abolish, was found not guilty in the first trial, and both the prosecution and the Ministry of Justice chose not to appeal. This has sparked strong backlash from rank-and-file prosecutors, further escalating the controversy. Legal experts suggest that 'breach of trust' is becoming the hottest keyword of the year.
Why was there no 'breach of trust' in the Daejang-dong case?
Breach of trust refers to a person handling another's business violating their given duty. For example, it applies when a company representative, executive, or employee uses their position to inflict damage on the company or organization to provide benefits to themselves or a third party. Intent is crucial. It is considered a breach of trust if a decision is made despite knowing that it would cause damage to the company.
It is broadly divided into breach of trust under the Criminal Act and breach of trust under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Specific Economic Crimes Act). Breach of trust under the general Criminal Act is punishable by up to 5 years in prison or a fine of up to 15 million won. In cases of professional breach of trust, the statute of limitations is 10 years, with penalties of up to 10 years in prison or a fine of up to 30 million won. Breach of trust under the Specific Economic Crimes Act is categorized by damages of 500 million won or more, or 5 billion won or more; for the latter, the statutory penalty is life imprisonment or imprisonment for at least 5 years.
The first trial court for the Daejang-dong private developers case, which has recently drawn attention from the legal community, acknowledged that a breach of trust occurred in the project but determined that it should be classified as a professional breach of trust under the Criminal Act, rather than under the Specific Economic Crimes Act. To prove a breach of trust under the Specific Economic Crimes Act, the amount of damage must be specific. The court acquitted the defendants, stating that "as of the time the project was finalized in 2015, the specific financial gain of the private developers could not be proven beyond a reasonable doubt."
Democratic Party pushes for abolition of breach of trust under Criminal Act
The Democratic Party has recently been moving toward abolishing the crime of breach of trust under the Criminal Act. If a proposal to abolish the crime passes the National Assembly, investigations and trials related to such cases would be terminated or dismissed. Even if the prosecution had appealed the Daejang-dong case, the situation would have likely led to a dismissal if the appellate court determined that only the Criminal Act's breach of trust provision applied.
Because the scope of its application and interpretation is so broad, breach of trust is a staple in corporate investigations. It is commonly applied when other subsidiaries endure losses to funnel more profits into a newly established subsidiary or one with high ownership by the owner's family. Some companies have pushed back against this, arguing that if the company is a non-listed entity 100% owned by the owner, the damage is borne by the owner alone, yet the charge still applies.
As a result, the perspectives of the prosecution, law firms, and the courts on the abolition of the crime differ slightly. While the prosecution protests, asking, "Does it make sense that companies can make business decisions with a high possibility of 'loss' without consequence?", the courts respond that "breach of trust always has ambiguous points, so if (breach of trust under the Criminal Act) were abolished, decisions could be made more quickly." There is also a sense within the Ministry of Justice and the prosecution leadership that by not appealing the Daejang-dong case, they were signaling, "If it is going to be abolished anyway, there is no need to appeal."
"Will it be gone this year?" Frequent inquiries from the business sector
The business world, which has long viewed the abolition of the breach of trust law as a long-cherished desire, is also closely watching the political landscape. The ruling party argues that the crime should be abolished to create a "business-friendly environment," while the business sector holds the position that breach of trust under the Specific Economic Crimes Act and the Commercial Act should also be abolished.
One CEO of a listed company explained, "We won most of our first trial in a litigation dispute with another company and didn't intend to appeal, but our legal counsel advised that 'if we don't fight over the parts we lost, it could become a breach of trust,' so we appealed against our will." They added, "It's a waste to spend tens of millions of won more on lawyers to fight, but we appealed to eliminate any grounds for future punishment. If there were no breach of trust law, we wouldn't have appealed."
In fact, if various breach of trust laws were abolished, cases involving Ourhome (former Vice Chairman Koo Bon-sung), Kakao035720 (former Chairman Kim Beom-su), Hankook Tire & Technology (Chairman Cho Hyun-bum), SillaJen215600 (former CEO Moon Eun-sang), and Taekwang Group (former Chairman Lee Ho-jin) could potentially be dropped from trials or investigations.
A partner at a law firm stated cautiously, "Breach of trust seems to be the hottest keyword in the legal community this year. We are receiving many inquiries from the business sector as to whether the crime will be abolished within the year, but individual companies seem burdened by the potential backlash if they express their interest too openly."