Ananti CEO's Appeal Trial on 'False Disclosure Charges'... Prosecution Requests FSS Official as Witness

At the appellate trial for Mankyu Lee, CEO of Ananti, and former Chief Financial Officer Hongkyu Lee, who were indicted on charges of making false disclosures in their business reports, the prosecution requested that a representative from the Financial Supervisory Service be called as a witness.

Mankyu Lee, CEO of Ananti. Ananti

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On the afternoon of April 21, during the first appeal hearing for violations of the Act on External Audit of Stock Companies and the Financial Investment Services and Capital Markets Act at the Seoul Central District Court Criminal Appellate Division 4-1 (Presiding Judge Song Jungho), the prosecution stated that a witness examination of the Financial Supervisory Service official, who investigated the case in the first trial, was not conducted at that time. Accordingly, the prosecution requested to call this official as a witness at the appellate trial.

The defense counsel for CEO Lee immediately raised strong objections, arguing, "Witness examinations during appellate trials are exceptionally permitted, but this case does not meet the necessary requirements." However, the court did not accept this argument. The court stated, "Since all defendants were acquitted in the first trial, if the prosecution does not take further action, it may be difficult to sustain the indictment. Moreover, since this witness was not examined in the first trial, it is necessary to hear their testimony." The court requested the prosecution to submit a written witness application and an additional statement, and decided that the defense would have an opportunity to provide their opinion afterward.

This case resulted in acquittals for all defendants in the first trial, and the prosecution appealed on the grounds of factual and legal misjudgment. Regarding the reason for the appeal, the prosecution stated, "Even according to international accounting standards, it is unreasonable to rely solely on the supporting materials submitted belatedly. Furthermore, although intent was recognized during the investigation, the acquittal in the first trial constitutes both a factual and legal misjudgment."

In contrast, CEO Lee's side countered, "The premise that all undocumented expenditures are treated as expenses is fundamentally flawed. Accounting treatment should be determined based on the economic substance of the expenditures, and since the company has undergone annual audits by external auditors, there was no intent." The defense added, "The prosecution has also failed to prove the core issues in this case."

Previously, the defendants were indicted on charges of making false business disclosures by processing tens of billions of won in undocumented company funds as advances between 2015 and 2016. The first trial court acquitted them, stating, "The Korean International Financial Reporting Standards (K-IFRS) is a principle-based system that allows for the selection of the most economically substantive method among possible options, so different accounting treatments are possible for the same matter." The court ruled that intent was difficult to establish.

The next hearing will be held at 3:15 p.m. on May 28. Witness examinations and the defendants' final statements are scheduled. The witness examination is expected to take about one hour, with 30 minutes for the prosecution's direct examination and 30 minutes for the defense's cross-examination.

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