[Invest&Law] VC CFO Embezzled Funds for 13 Years... 4-Year Prison Sentence Finalized

Received Approval for Total Employee Payroll, Then Redirected Funds to Himself

Court: "The Nature of the Crime Is Extremely Serious...No Restitution Has Been Made"

The Chief Financial Officer (CFO) of a mid-sized domestic venture capital (VC) firm has been handed a confirmed prison sentence after siphoning off more than 1 billion won of company funds over 13 years by manipulating the payroll ledger. This case involved exploiting gaps between internal approval procedures and external payroll disbursement processes, as the CFO effectively managed the company’s finance, HR, and payroll operations alone.

According to legal circles on July 8, the four-year prison sentence for Mr. Jeong, who was indicted on charges of embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes and breach of trust in the course of work, was recently confirmed. This followed Mr. Jeong’s withdrawal of his final appeal after contesting the prison term handed down in the appellate court.

Previously, Mr. Jeong served as both Head of Investment Management and CFO at Company A from 2005 to 2018. He was in charge of overseeing the company’s finance and HR work, including notifying the company’s tax agent of the salaries that were to be paid to executives and staff, and managing payroll and expense processing tasks.

Mr. Jeong submitted inflated total salary and bonus data for other employees to obtain approval from Company A’s CEO, while providing the tax advisory firm with false documents showing the inflated amounts as if they were to be paid to himself. Through this, he received excess salary and bonuses, and his retirement pension was also over-calculated based on the falsified annual salary figures.

Mr. Jeong’s wrongdoing only came to light nearly two years after his resignation. In 2020, a former employee requested the issuance of a certificate of earned income tax withholding. The amount stated on the certificate, which was issued by the company based on its internal payroll ledger, did not match the actual amount the employee had received. After the employee raised this issue, Company A compared the bonus and payroll ledgers prepared by Mr. Jeong, which had been kept internally, with the actual payment records prepared by the tax advisory firm. It was only then that they became aware of the circumstances indicating embezzlement. Company A filed a criminal complaint against Mr. Jeong later that year.

An investigation revealed that Mr. Jeong had embezzled a total of 1,481,920,000 won. It was also found that he used company funds to pay for health checkups for his spouse and other family members, which led to a guilty verdict on the charge of breach of trust in the course of work as well. The CEO of Company A testified to the investigative authorities, “I recall Mr. Jeong’s actual annual salary was around 70 to 80 million won in the early days of his employment, and about 130 to 150 million won just before he left the company.”

The first trial court, citing “extremely egregious methods” as a special aggravating factor, sentenced Mr. Jeong to four years in prison. The court pointed out that Mr. Jeong had exclusive control over the company’s finance and HR work and the materials related to employee payroll, carried out the crimes over a long period, and that restitution for damages had not been made.

Seoul Central District Court, Seocho-gu, Seoul. The Asia Business Daily Database

The appellate court dismissed both Mr. Jeong’s and the prosecutor’s appeals, upholding the original sentence. The appeals court stated, “Considering the nature and duration of each crime, the methods used, Mr. Jeong’s position within the company, and the total amount of damage, the offenses are extremely serious. While Mr. Jeong has shown some remorse, there are no changed circumstances sufficient to overturn the existing sentence.” With Mr. Jeong’s withdrawal of his final appeal, the verdict was finalized.

This content was produced with the assistance of AI translation services.