Appellate defense in a breach of trust case under the Act on the Aggravated Punishment of Specific Economic Crimes over real estate development loans

Officers and employees of a financial institution were indicted for breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes after they made loans to a real estate development project that later failed, leaving part of the loans unrecovered.

They were convicted at first instance, and Attorney Jaehoon Lee represented the defendants on appeal, contesting the lawfulness of the lending process and whether the offense of breach of trust had been made out.

The central issue was whether a breach of duty and intent to commit breach of trust by the financial institution's officers and employees could be found merely because losses occurred after the loans to the real estate development project.

In particular, the questions were whether internal rules and procedures had been followed in the loan review and approval process, and whether the project failed because of improper decisions at the time of lending or because of later changes in economic conditions.

It was also necessary to distinguish the roles and scope of responsibility of the decision-makers who approved the loans and the staff who handled them.

Attorney Lee reviewed how the loans were made, the internal review procedures, and the reporting to the board of directors and approval by the loan review committee, and argued that the defendants had neither breached their duties nor intended a breach of trust.

He analyzed the effect of the real estate downturn and the failure of the development project on recovery of the loans, and contested whether breach of trust had been committed by distinguishing how the work was handled at the time of lending from the losses that arose afterward.

He also stressed that, for staff members who had no authority to decide on loan approvals, the court needed to consider each person's individual role and degree of responsibility.