Is It Possible to Recover the 780 Billion Won Daejang-dong Criminal Proceeds? Yes, But...

[Financial News] The forfeiture of criminal proceeds has become a new focal point in the ‘Daejang-dong private operator’ case, which has sparked controversy after the Prosecution Service decided not to appeal. Because the prosecution dropped the appeal, it is now difficult to seek additional forfeiture beyond the 47.3 billion won recognized in the first trial. While Minister of Justice Jung Sung-ho countered that ‘damages can be recovered through civil litigation,’ legal experts noted, ‘Even if possible, it will not be easy.’
According to legal circles on the 11th, the total amount of forfeiture the Prosecution Service sought in the first trial against Dong-gyu Yu, former head of planning at the public corporation, Kim Man-bae, major shareholder of Hwacheon Daeyu Asset Management, and three others in the Daejang-dong case was about 781.5 billion won. This forfeiture was related to violations of the Act on the Prevention of Conflict of Interest Related to Duties of Public Servants, bribery, and other corruption crimes. The first-instance court only found them guilty of breach of trust, sentencing Kim and Yu to forfeit about 43.6 billion won each, and Min Yong Jung to forfeit 3.7 billion won for bribery, totaling approximately 47.3 billion won.
On the other hand, the court acquitted the defendants of violating the Act on the Prevention of Conflict of Interest Related to Duties of Public Servants and bribery, and with the Prosecution Service dropping its appeal, it has become virtually impossible to recover the entire 781.5 billion won. Even if the case proceeds to the Supreme Court, under the principle of prohibition of unfavorable changes, it is not possible to increase the forfeiture amount recognized in the first trial.
So, can the public corporation recover damages through civil litigation? While it is no longer possible to increase the forfeiture amount in criminal proceedings due to the dropped appeal, legal experts generally agree that Seongnam Urban Development Corporation (SDC) can still pursue separate civil claims for damages. However, they also point out that proving actual damages is complex and time-consuming, making the process challenging.
In legal practice, forfeiture by the Prosecution Service is generally considered a much faster means of recovering damages than civil litigation. This is because, in civil cases, hearings are often postponed until the related criminal case concludes. In practice, civil courts have relied on evidence obtained during the criminal investigation. An Yeongrim, an attorney at Seonseung Law Firm and a former prosecutor, explained, ‘The civil damages process is much slower, but if forfeiture is achieved, subsequent procedures can proceed much more quickly.’
For this reason, if the amount recognized in the criminal judgment is low, SDC may be at a disadvantage in civil litigation as well. An attorney in charge of corporate legal affairs commented, ‘If the criminal court confirms the criminal proceeds at around 40 billion won, it will be difficult to prove a higher amount in civil court.’ A former presiding judge also noted, ‘In theory, the amount of damages awarded in civil court may not decrease, but in reality, it is likely to be reduced due to the dropped appeal.’
On the other hand, some predict that sufficient compensation is possible in civil litigation, as SDC only needs to prove the actual damages incurred, unlike in criminal cases. Since the first trial found the defendants guilty of breach of trust, partial compensation for SDC's losses is considered feasible.
Lee Sabek, an attorney at Saebyeol Law Firm, stated, ‘Forfeiture and damages serve different purposes and have different legal natures, so the liability for damages is not reduced simply because forfeiture has occurred.’ He added, ‘There is a possibility that a separate claim for damages by the victim could be granted. However, the likelihood of success depends on the extent to which the occurrence and amount of damages can be proven.’
According to Supreme Court of Korea precedent, when a victim cannot exercise a claim for restitution or damages, the state may confiscate or forfeit the assets.
scottchoi15@fnnews.com Choi Eun-sol Reporter