Major Law Firms Compete in the 'Kakao Litigation Olympics'

Published 21 Aug.2024 14:01(KST)

Top Law Firms Assemble Elite Teams for a Showdown
Reputation and Actual Results Diverge

Summary

▶ In the Kakao case, major law firms such as Sejong and Kim & Chang took on the defense of Chairman Kim Beom-su and CEO Bae Jae-hyun, but with key figures being detained, the expected outcomes were not achieved.

▶ Hwawoo successfully blocked all arrest warrants for former Kakao Entertainment CEO Kim Sung-soo and Division Head Lee Junho, while Yulchon lawyers, who were also investigated alongside Kakao executives, were ultimately cleared of charges.

▶ This case became a benchmark highlighting the stark differences in litigation capabilities among law firms, with the final verdict expected to be decided in Chairman Kim Beom-su’s trial. The defense, led by Kim & Chang, is anticipated to focus on achieving a not guilty verdict.

"These days, there is talk in the legal community that lawyers are divided into two groups: those who handled the 'Kakao and Kim Beom-su case' and those who did not."

This was said by a mid-level lawyer from a major law firm during a meeting with a reporter from the Legal Times on the 19th. As this lawyer noted, the Kakao case has become the hottest topic in the legal profession recently.

[Image source=Yonhap News]

At one point in 2021, Kakao Group’s market capitalization reached 120 trillion won, ranking it among the top five conglomerates in South Korea. The founder and owner became the subject of investigation, which, having passed from the Financial Supervisory Service to the prosecution (Seoul Southern District Prosecutors’ Office), has prolonged for over a year and a half. This led to a surge in demand for defense, turning the case into a battleground for major law firms and prominent former officials-turned-lawyers.

Major Law Firms and Former Officials Compete Fiercely

This case also showcased the criminal defense capabilities of law firms and lawyers. Firms such as Kim & Chang, Bae, Kim & Lee, Sejong, Hwawoo, and Daeryuk Aju actively participated, along with many high-ranking former officials including former high prosecutors and court presidents.

Sejong played a key role during the investigations by the Financial Supervisory Service and prosecution. Led by lawyer Lee Jeong-hwan, a former deputy chief prosecutor of the Seoul Southern District Prosecutors’ Office, they formed a criminal defense team of over ten members. Sejong defended former Kakao Investment General Manager Bae Jae-hyun during the prosecution phase but failed to prevent his detention.

Kim & Chang joined the case later during the ongoing prosecution and brought in lawyer Lee Ho-jae, a former Seoul High Court judge. Notably, Kim & Chang recommended the establishment of a ‘Compliance and Trust Committee’ within Kakao Group, appointing former Supreme Court Justice Kim So-young as its chairperson.

Kim & Chang also represented Ji Chang-bae, chairman of One Asia Partners, who was suspected of conspiring in SM Entertainment’s stock price manipulation, but they could not prevent his detention following the arrest warrant hearing.

During Chairman Kim Beom-su’s prosecution, besides major law firms, former Legal Research and Training Institute Director Yeo Hwan-seop, known as a ‘legend in special investigations’ and former heads of the Supreme Prosecutors’ Office’s Central Investigation Department and Seoul Central District Prosecutors’ Office’s Special 1st Division, also took part in the defense. For the investigation of former Kakao Investment General Manager Bae Jae-hyun, who was detained before Chairman Kim, former head of the Supreme Prosecutors’ Office’s Anti-Corruption and Special Crime Investigation Unit Kim Ki-dong and former Seoul Western District Prosecutors’ Office Chief Lee Dong-ryeol participated in the defense.

The highlight was the detention warrant hearing for Chairman Kim Beom-su. Sejong handled the initial part of the hearing, while former Jeonju District Court Chief Han Seung, a former senior research judge at the Supreme Court, took over the latter part. Han, who was not involved during the prosecution phase, was urgently appointed before the hearing and reportedly delivered a passionate defense, even preparing a PowerPoint presentation, but was unable to prevent the detention. Some lawyers in Seocho-dong expressed surprise that major law firms seemed to step back during this crucial hearing.

The indictment lists 36 lawyers defending Chairman Kim Beom-su. It reveals that veteran lawyers from Kim & Chang and Sejong, along with high-ranking former judges and prosecutors, are fully committed to his defense.

With key figures such as Kim Beom-su, Bae Jae-hyun, and Ji Chang-bae detained, their ‘all-out defense’ efforts are considered largely unsuccessful. An exception is Hwawoo, which defended former Kakao Entertainment CEO Kim Sung-soo and Division Head Lee Junho. Both faced two arrest warrants each, all of which were dismissed. Notably, Division Head Lee Junho was unusually granted a non-prosecution disposition (suspension of indictment) by the prosecution, reportedly utilizing the leniency program under the Capital Markets Act newly introduced this year.

Yulchon’s case is unique. Yulchon lawyers were investigated alongside Kakao executives but were recently cleared of charges. Two lawyers from Yulchon who provided investment-related advice to Kakao during its acquisition battle with HYBE over SM Entertainment were investigated for alleged violations of the Capital Markets Act, but the prosecution ultimately dismissed the charges.

The Final Battle Will Be in Court

The ‘Kakao Defense Olympics’ is expected to reach its final conclusion in court. Besides Sejong and Kim & Chang, Bae, Kim & Lee, ranked second or third in the law firm industry, has also joined. Bae, Kim & Lee’s ace lawyer, Sung Chang-ho, a former chief judge of the Seoul Southern District Court, is leading the defense for former CEO Bae Jae-hyun.

The trial strategy and defense for Chairman Kim Beom-su, who was indicted and detained on the 8th, are expected to be led by Kim & Chang. It is known that the firm’s leadership is assembling the best defense team, focusing on a ‘not guilty’ defense rather than sentencing mitigation. Chairman Kim’s first hearing is scheduled for September 11 at the Seoul Southern District Court.

Kakao recently recruited a Hwawoo lawyer as a new head of its legal office. Lawyer Lee Dong-gyu of Hwawoo, who led the ‘successful defense’ for CEO Kim Sung-soo and others, is set to join Kakao starting next month.