[Representation] Financial Criminal Defense

Barun Law Defends a Former CEO Accused of Accounting Fraud Worth KRW 60 Billion to be Cleared of Charges During the Prosecutorial Investigation

Case Background and Key Issues

• The client sold his shares to an affiliate of a conglomerate in 2022. Later, financial authorities accused the client of engaging in fraudulent accounting practices amounting to KRW 60 billion over several years. The Financial Supervisory Service, the Audit Committee, and the Securities and Futures Commission referred the case to the prosecution for criminal investigation.
• The client argued that the fraudulent accounting was orchestrated by the former CEO, who had hired his acquaintances as financial officer, with intent to list the company on the stock market.
• Even after the client returned to management, the finance officer resigned immediately, and the client, lacking accounting expertise, was unaware that the fraudulent practices continued when they signed the financial statements.
• The external auditor of the company failed to detect the fraudulent accounting, and even during the due diligence for the share sale, the audit firm did not uncover the issue. This made it nearly impossible for a layperson like the client to detect the fraud.
• However, the former CEO falsely claimed that they had informed the client about the fraudulent accounting from the beginning, putting the client in a difficult position.

The client sought our expertise in financial crime defense, requesting a robust defense to prevent unjust punishment. We handled the case from the Financial Supervisory Service stage through the prosecution’s investigation.

Our Defense Strategy

• It is generally difficult to convince financial authorities that a CEO who signed fraudulent financial statements acted without intent. Nevertheless, we focused on proving the client’s lack of knowledge through rigorous defense in interviews with financial regulators, the Audit Committee, and the Securities and Futures Commission.
• Despite our strong efforts in direct arguments before financial authorities, the defense was initially unsuccessful because the client was a representative director who profited from the stock sale and stated that he had been informed about the fraudulent accounting.
• After the case was referred for criminal prosecution, we meticulously gathered additional evidence, uncovering internal documents prepared by the former CEO to dominate management rights and proving the objective circumstances under which the client lost managerial control. We also ensured that key long-term employees provided testimony to the prosecution, ultimately leading the prosecution to acknowledge that the client was unaware of the fraudulent accounting.

Outcome and Significance

• By engaging us from the early stages of the financial investigation and fully disclosing the truth, the client successfully demonstrated his innocence.
• Despite the financial authorities’ criminal referral, our defense strategy ultimately led to a “no charges” decision from the prosecution, recognizing that the client had no intent or responsibility for the fraudulent accounting.

□? Attorneys in charge: Cho Jae-Bin, Ryu Jong-Myoung, Sung Su-In, Kim Yong-Hwan, Yu Da-Won

?Attorney Cho, Jae Bin's profile

?Attorney Ryu, Jong Myoung's profile

?Attorney Sung, Su In's profile

?Attorney Kim, Yong Hwan's profile

?Attorney Yu, Da Won's profile