"Embezzled Company Money" - Cosmetics Company CEO Sued... Prosecution Says "Not Breach of Trust"

Co-founder: "Diverted clients and assets through a U.S. corporation"... sued for occupational breach of trust
Prosecution: "Insufficient proof of intent to breach trust and of damage... a civil dispute based on business judgment"

The CEO of a cosmetics export company who was sued over suspicions of diverting company clients and assets by using a local U.S. corporation was cleared of the charges by the prosecution.

On the 28th, according to the legal community, the Suwon District Prosecutors' Office on the 11th of last month issued a non-indictment disposition against Mr. A, a businessman in his 50s who had been suspected of occupational breach of trust, on the grounds of insufficient evidence.

Mr. A was accused of establishing a separate U.S. corporation while running a cosmetics export company with co-founder Mr. B, then transferring existing clients to that corporation and causing damage by not paying sales proceeds to the company.

In response, Mr. A countered that the U.S. corporation was a normal business structure established to stably maintain overseas transactions, and that the transfer of clients was also a management judgment to maintain contracts with existing buyers.

He also argued that the sales proceeds were not paid simply because inventory stored in a local U.S. warehouse had not been sold, delaying settlement, and that he had not misappropriated or diverted company assets.

As a result of its investigation, the prosecution judged it difficult to recognize Mr. A's occupational breach of trust charge.

The prosecution found that the mere facts of a change in transaction structure and non-payment of sales proceeds made it difficult to recognize the intent to breach trust with the aim of causing damage to the company, and that there was also insufficient objective evidence to support that he had privately acquired company property or caused damage to the company.

In addition, it judged that this case is a conflict over business operation and settlement arising during a joint business process, and has a stronger character of a civil dispute than a criminal case, and issued a non-indictment disposition for Mr. A.

Seo Bong-ha, the Daeryun LLC attorney who represented Mr. A, said, "In export businesses using overseas corporations, the transaction structure between the domestic and local corporations is complex, so there are not a few cases in which management judgments lead to criminal disputes," adding, "This case is an example in which, by demonstrating the circumstances of the U.S. corporation's establishment, the actual transaction structure, and the inventory management process with objective materials, it was recognized that management judgment and occupational breach of trust must be distinguished."

Reporter Gong Hye-rin heygong00@kyeonggi.com

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"Embezzled Company Money" - Cosmetics Company CEO Sued... Prosecution Says "Not Breach of Trust" (Go to Link)