Man in his 50s accused of ‘hiding assets to avoid compulsory execution’, acquitted on appeal

Court: “The purpose of the exemption cannot be proven”
1st trial guilty ‘fine sentence’ overturned

A man in his 50s who was indicted on charges of hiding assets to avoid compulsory execution due to default on debt was acquitted on appeal.

On the 10th, Changwon District Court's 3-2 Criminal Division (Chief Judges Kwon Mi-yeon, Jeong Hyeon-hee, and Oh Taek-won) acquitted Mr. A, who was brought to trial on charges of evasion of compulsory execution.

The crime of evasion of compulsory execution is a crime committed by concealing, damaging, or falsely transferring property or injuring a creditor by incurring a false debt for the purpose of evading compulsory execution. According to Article 327 of the Criminal Act, you may be punished by imprisonment for up to 3 years or by a fine of up to 10 million won.

Mr. A, who previously ran a firefighting facility management business, has been entrusted with fire safety management services for a building since July 2012. However, due to negligence in management, a major fire broke out, and a related damages lawsuit was filed, putting the company at risk of having to pay 400 million won in compensation.

When Mr. A was in danger of having his assets forcibly executed, he established a new company with his spouse as the CEO. In addition, contracts were signed under new names with some of the existing consignment management contractors.

The prosecution believed that Mr. A had concealed his assets for the purpose of avoiding compulsory execution for damages, and charged him with evasion of compulsory execution.

The first trial found Mr. A guilty of the charge and sentenced him to a fine. The first trial court said, “Mr. A concealed the existing company’s assets by falsely transferring business partners.”

However, the appellate court found Mr. A not guilty. The appellate court ruled, “Considering various circumstances, such as the fact that the company’s image deteriorated after losing the related civil suit and the contract was terminated, and the existing company’s liability for damages was transferred to the new company, the submitted evidence alone cannot be considered to have proven that Mr. A had the purpose of avoiding compulsory execution.”

Attorney Daeryun Koh Jeong-hang of the law firm that represented Mr. A explained, "Mr. A terminated contracts with some of his clients and transferred them to a company under his spouse's name for business reasons such as difficulty in continuing the business. In other words, it was not for the purpose of debt avoidance. Accordingly, the liability for damages for the fire was also transferred to the new company, and the damaged building was granted a succession execution order under Article 31 of the Civil Execution Act and could proceed with compulsory execution procedures."

He continued, “In the end, Mr. A’s act of transferring the firefighting facility business and transferring its business partners does not constitute false transfer or concealment of evasion of compulsory execution,” and added, “Therefore, we were able to obtain an acquittal by emphasizing that there was no risk of harming creditors.”

Digital Content Team

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Man in his 50s accused of ‘hiding assets to avoid compulsory execution’, acquitted on appeal (go)