Korea's Supreme Court keeps Sewha IMC's former owners out of prison over a 27 billion won slush-fund case

Spread across the 136 months from September 2006 to January 2018, the prosecution's allegation comes to roughly 200 million won a month ^[20]. The company was a small and mid-sized manufacturer from the Jeonnam and Gwangju region, listed on the main board ^[14]. The appeals court accepted most of the case, though not all of it. It found that the father, who abused his position as founder, embezzled 8.2 billion won, and that the son embezzled 14 billion won ^[10]. If the two findings do not overlap, they add up to 22.2 billion won, about 82% of the allegation ^[16][17]. The court also called the scale of corporate tax evasion very large ^[10].

Where it cut the case, the court explained why. "Prosecutors viewed Sewha IMC's excessive service payments to a particular company as a means of creating slush funds, but some of the services appear to have actually been performed," the court said ^[11]. "Even if the services, for which 500 million won was paid each month, were inflated, it is difficult to regard this as embezzlement," it said ^[12]. At that rate the contract cost the company 6 billion won a year ^[19].

The cash penalties are small. The son received three years suspended for five years and a 1 billion won fine ^[3]. Kang, the former executive vice president, received two years and six months suspended for four years and a 420 million won fine ^[4]. The two fines total 1.42 billion won ^[18], less than the 1.6 billion won in taxes the pair were accused of evading ^[7]. Both had already drawn suspended terms and fines at first instance in the separate tax case ^[15]. The prison terms the appeal replaced came from the embezzlement trial ^[8].

One reading of the outcome is evidentiary. The appeals court combined the two cases and acquitted on some embezzlement and tax counts before suspending every term ^[9], and the top court let that stand ^[13]. Another is that the courts treated 22.2 billion won of embezzlement, as found, as compatible with no prison time. A third is that repayment or other mitigation drove the result; the report does not say whether any money went back to the company. I think the second reading explains most of the result. The sum found fell about 18% short of the allegation, while time to serve went from three to five years to none ^[17][8][9].

A repayment record would weaken that view. If the full appellate judgment shows the executives repaid the company, the suspended terms look like a restitution outcome, and the leniency charge mostly falls away. The ruling also comes from one division of the court, with Justice Chun Dae-yeop presiding ^[1]. One case does not establish how Korean courts sentence governance abuse at listed companies.