After Doubling the Subcontract Unit Price, "Pay More"…Fraud-Suspected CEO Cleared of Charges

The head of a Busan-area shipbuilding company, who was sued on suspicion of fraud amounting to several hundred million won in connection with the settlement of subcontract payments by a subcontractor, was cleared at the police investigation stage.

According to the Busan Saha Police Station on the 15th, a decision not to refer the case was made regarding Mr. B, the head of shipbuilding Company A, who had recently been booked on fraud charges.

Mr. B was suspected of having, from June to November 2024, deceived Mr. C, the operator of a subcontractor, by promising to pay work fees if C carried out patrol-boat assembly work, thereby swindling property gains worth about 700 million won.

Mr. C claimed, "Mr. B deceived me about the amount of the main contract with the prime contractor, and when I recalculated the work fees, there was a difference of several hundred million won from the amount actually paid."

However, Mr. B's side rebutted, "We accepted Mr. C's request to secure his profits and raised the unit price by more than double compared to the previous contract, and to prevent labor-cost arrears we even gave advances, providing maximum convenience," adding, "If anything, it was Mr. C who disregarded the contracting agreement."

The police accepted Mr. B's argument. The police investigation confirmed that the individual construction contracts between both sides had been drawn up through normal procedures and that, before the contract, Mr. B had clearly informed Mr. C of the actual site and scope of work.

Regarding the charges of deception and swindling as well, the police stated, "The progress payments made each month were calculated and paid after Mr. C and Mr. C's on-site manager directly verified the work rate, so it is difficult to view this as fraud." The police added, "Even according to the analysis of the account transaction records, most of the progress payments Mr. B received from the prime contractor appear to have been normally paid to Mr. C's side."

Attorney Jung Woo-young of Daeryun Law Firm, who handled Mr. B's legal representation, explained, "In a subcontracting relationship, a contractor has no legal obligation to disclose the full amount of its contract with the prime contractor to the subcontractor, and concealing it does not constitute the 'act of deception' required for fraud," adding, "Because the complainant disregarded the agreed fixed unit price and put forward a unilateral hourly-rate calculation, we were able to clear the injustice by promptly demonstrating objective circumstances such as the settlement records from the early stage of the investigation."

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