Supreme Court: General Advisory Contracts Not Based on Specific Issue Resolution Are Not Considered Solicitation of Brokerage Fees

The Supreme Court has ruled that even if a former military officer received compensation through an advisory contract with a defense contractor, if the advisory content is related to company management rather than the resolution of specific issues, it cannot be considered an act of bribery solicitation.

The Supreme Court Criminal Division 3 (Presiding Justice Ahn Cheol-sang) overturned the lower court’s ruling that sentenced Mr. A, who was indicted on charges of violating the Act on the Aggravated Punishment, etc. of Specific Crimes (bribery solicitation) and post-bribery fraudulent acts, to one year in prison with two years of probation, and remanded the case to the Seoul High Court on the 28th of last month (2017Do21248).

Mr. A is a former Army general who served from 1975 to 2008. Between 2015 and 2016, he received 55.94 million won from defense industry company B, which manufactures military helicopters and reconnaissance satellites, and 19.34 million won from company C, which manufactures functional combat boots, as compensation for advisory contracts.

The prosecution alleged that Mr. A was requested by the defense contractors to lobby military officials, entered into formal advisory contracts, and received advisory fees, charging him with bribery solicitation and related offenses.

Article 3 of the Act on the Aggravated Punishment, etc. of Specific Crimes stipulates that a person who receives, demands, or promises money or benefits for mediation related to a public official’s duties shall be punished by imprisonment for up to five years or a fine of up to 10 million won.

The first and second trials both found that the contracts with the two companies constituted bribery solicitation, sentencing Mr. A to one year in prison with two years of probation.

However, the Supreme Court ruled that the advisory contract related to company B could not be considered an act of bribery solicitation and overturned the lower court’s decision.

The Supreme Court stated, "If compensation is paid as a reward for providing convenience based on the defendant’s professional knowledge and experience for the efficiency, expertise, and economic feasibility of work, without presupposing direct resolution of specific issues, it may be considered a normal labor provision rather than bribery solicitation."

It further ruled, "There is sufficient reason to view the contract between Mr. A and company B as one providing general management advisory services in exchange for compensation, and based solely on the evidence submitted by the prosecution, it is difficult to conclude beyond reasonable doubt that the contract was merely formal and that money was received for mediation related to a public official’s duties as alleged in the indictment."

Moreover, the Court stated, "The lower court should further examine the content and substance of the contract, the circumstances and purpose of its conclusion, and the nature of the work performed by Mr. A to determine whether there are grounds to consider that Mr. A solicited mediation related to a public official’s duties and received money as compensation, rather than providing general advisory services on overall management and receiving compensation." However, the Court acknowledged that the advisory contract with company C did constitute bribery solicitation. The lower court’s ruling acquitting Mr. A of charges of post-bribery fraudulent acts and bribery offering was also upheld.

A Supreme Court official explained, "This ruling clarifies that in specific cases where advisory contracts related to matters within a public official’s duties are concluded, receiving compensation under such contracts does not automatically constitute bribery solicitation. It also sets forth, for the first time, criteria that to establish bribery solicitation, it must be considered whether a ‘specific issue’ exists, whether the contract compensation is for ‘intermediary acts,’ and a comprehensive consideration of the amount, conditions, method, and timing of payment."

Hong Yoon-ji, Legal Times Reporter

※This article is based on content supplied by Law Times.

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