[Ask a Lawyer] Strengthening punishment on corporate bribery, embezzlement

Ask a Lawyer is a regular column written by attorneys at Yoon & Yang LLC on various legal aspects of the Korean life or business. The content provided here is general legal information, not legal advice on a specific situation. -- Ed.


Q1. Does it constitute criminal receipt of commercial bribery if a person who administers another person’s business causes a “third party,” rather than “himself,” to receive valuables in response to an improper solicitation?

If a person who administers another person’s business receives property or pecuniary advantage in response to an improper solicitation in connection with his/her duty, he/she shall be punished on the charge of receiving a commercial bribe and the person who provides property or pecuniary advantage shall be punished on the charge of giving a commercial bribe, based on Article 357 (1) and (2) of the Criminal Act.

However, what would happen if a person causes a third party instead of himself/herself to receive property or pecuniary advantage in response to an improper solicitation?

There was a case where A, an employee of a highway management company, helped B’s company to obtain the right to operate a service area on a highway. Once B obtained the right, B allowed A’s sister-in-law to operate a portion of the shops in the service area. Subsequently, A was indicted for receiving a commercial bribe and B was indicted for giving a commercial bribe. In this case, the Supreme Court acquitted A and B, ruling, “the offense of receiving a commercial bribe is committed when a person who administers another person’s business receives property or pecuniary advantage in response to an improper solicitation, and the offense of giving a commercial bribe is committed when a person gives property or pecuniary advantage in the above case. 

Considering the text of law, it is clear that giving or receiving commercial bribery is not committed even if a person who administers another person’s business receives an improper solicitation, so long as he/she causes a third party to receive property or pecuniary advantage” (Supreme Court Decision 2004Do2581).

In light of the foregoing, would the results have been the same if A had been a public official in the example above? In the case of bribery (i.e., bribery involving a public official, which is distinguishable from commercial bribery; hereinafter “public bribery”), A and B would have been punished because there are specific statutes that govern third-party public bribery.

In order to close the above loophole in the private sector, the commercial bribery provisions in the Criminal Act were amended. The amended Criminal Act was put into force on May 29, 2016 to the effect that commercial bribery is committed even when a person helps “a third-party” to receive property or pecuniary advantage in response to an improper solicitation. Accordingly, the above case is punishable under the amended Criminal Act.


Q2. If a person gives a bribe to a public official or an employee of a private company with a company’s slush funds, is the person punishable on the charge of embezzlement, in addition to the offense of giving a public/commercial bribe?

Embezzlement is not committed in every case where a company forms slush funds. Embezzlement is not applicable if a company raises funds necessary for its operation for matters that cannot be properly recorded in accounting books, because there is a lack of intent to unlawfully acquire such funds.

If so, what would happen if a company forms slush funds to provide public bribes to a public official or commercial bribes to an employee of a private company? The Supreme Court held, “a company should not conduct business activities by means of criminal offenses and should comply with the prohibition on bribery. Therefore, if a director of a company provides a bribe with company funds in violation of his/her duties, the bribe should be deemed to have been given not entirely for the company’s interests but also for the bribe recipient’s interests or for other purposes. Hence, the director cannot be exempted from embezzlement. Unless there are special circumstances, this is also applicable to the case where a director of company makes an improper solicitation and gives a commercial bribe with company funds” (Supreme Court Decision 2011Do9238).

Therefore, if a person commits bribery or commercial bribery with a company’s slush funds, his/her punishment could be aggravated by the charge of embezzlement in addition to bribery or commercial bribery.

By Hong Kyoung-ho
Attorney and partner of law firm Yoon & Yang LLC