Suspended Sentence for Chairman of Mid-sized Medical Device Company Issuing False Tax Invoices

[Asia Economy Reporter Kim Daehyun] The chairman of a mid-sized medical device company and a hospital director were sentenced to suspended prison terms in the first trial for exchanging false tax invoices by inflating the payment amounts for medical equipment sales.

[Image source=Yonhap News]

On the 27th, according to the court, the Criminal Division 23 of the Seoul Central District Court (Presiding Judge Jo Byeonggu) sentenced the chairman (71) and executive director (50) of mid-sized medical device company H, as well as a client hospital director (76), who were indicted for violating the Tax Offense Punishment Act, to "a high degree of blameworthiness considering the motive and outcome of the crime and the inflated supply amount" and 6 months imprisonment with 1 year probation, respectively. The H company corporation was fined 100 million won.

Earlier, H company was charged with violating the Tax Offense Punishment Act by delivering medical devices worth about 4.09 billion won to a client hospital in November 2014 and issuing false tax invoices by overstating the supply amount to about 9.09 billion won.

During the trial, H company denied issuing false tax invoices. Their lawyer argued, "The sales price was determined by adding related costs such as maintenance and repair fees and margin to the purchase cost of the medical devices," and claimed, "The medical equipment sales contract considers not only the purchase cost but also costs such as equipment import and installation fees, construction fees, and interior costs."

The first trial court did not accept these claims. It stated, "It is judged that the amount was inflated not only for purchasing medical equipment but also for construction funds for the client's hospital," and added, "It is difficult to see the amount as properly calculated reflecting maintenance costs like ordinary medical equipment transactions."

The court pointed out, "Since the tax rates for goods and services are the same, if goods and services worth about 10 billion won are actually provided, issuing a tax invoice including maintenance costs in the medical equipment price for convenience would not result in tax evasion," but added, "However, in this case, it appears that the tax invoice was inflated for previous debt settlement. It does not seem that maintenance and other services worth about 5 billion won exceeding the medical equipment price were actually scheduled to be provided."

However, regarding the charge of fraud under the Specific Economic Crimes Act for creating false contracts from 2013 to 2015 stating that medical devices would be installed in a newly established hospital and obtaining lease loans exceeding 10 billion won from a certain capital company based on those contracts, the court ruled not guilty. The court explained, "It is difficult to conclude that the capital company was deceived or that there was no actual intention to install at the time," and "The hospital director fully paid all overdue lease fees related to the lease contract, so the capital company did not suffer any actual loss."

Both the prosecution and H company appealed the first trial verdict.

This content was produced with the assistance of AI translation services.