[Invest&Law] 'Hyosung Corruption' Lee Sangwoon Retrial Verdict Set for December 4

Charges Include Violations of the Commercial Act Over Illegal Dividend Allocation
Conclusion After More Than a Decade... Lee Appeals for Leniency

The sentencing date for Lee Sangwoon, Vice Chairman of Hyosung Group, who has been on trial for more than a decade due to the Hyosung Group corruption case, has been set. On November 6, the Criminal Division 3 of the Seoul High Court (Presiding Judge Lee Seunghan) announced that it would deliver its verdict on December 4, after concluding the trial on charges including violations of the Commercial Act related to unlawful dividend distribution.

During the trial, Vice Chairman Lee's attorney challenged the prosecution's calculation of the amount of tax evasion, arguing for the application of the minimum tax. The minimum tax is the least amount of tax that an individual or corporation with income must pay. Vice Chairman Lee himself appealed to the court, asking for leniency so that he could properly wrap up company affairs.

The court stated that it intended to deliver the verdict within the year but left room for further proceedings, saying, "If the prosecution raises new issues, the trial will be reopened." The prosecution responded, "If the minimum tax is applied, the amount of tax evasion could actually increase," and said it would discuss the matter with the tax authorities.

In January 2014, the prosecution brought charges against the late Cho Seokrae, Honorary Chairman of Hyosung Group, and Vice Chairman Lee. They were accused of embezzling 69.8 billion won from Hyosung's overseas subsidiaries through a Hong Kong paper company and causing 23.3 billion won in damages to the company by using funds from Hyosung's Singapore subsidiary to forgive the Hong Kong paper company's loan debt. Additional charges included evading 123.7 billion won in corporate taxes through accounting fraud totaling 501 billion won over more than ten years since 2003, and evading approximately 11 billion won in capital gains taxes by buying and selling shares worth several hundred billion won under borrowed names.

In the first trial and the appeal, Honorary Chairman Cho was sentenced to three years in prison, and Vice Chairman Lee received a sentence of two years and six months in prison, suspended for four years. In December 2020, the Supreme Court overturned the lower court's ruling, which had found both guilty of some corporate tax evasion charges and not guilty of unlawful dividend distribution, and remanded the case to the Seoul High Court. The Supreme Court held that "since the tax authorities canceled the corporate tax assessment for the 2008 business year, the crime of tax evasion, which presupposes a tax liability, cannot be established." However, it also ruled that "if there were no distributable profits in the 2007 business year but dividends were paid based on falsified financial statements, the crime of unlawful dividend distribution applies unless there are special circumstances."

Reporter Lee Sangwoo, Law Times

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