Kim Hoo-gon, Managing Partner at Lee & Ko: "A consistent line of reasoning is needed from investigation through indictment and prosecution" [Choi Seok-jin's Law & Business]

The overall volume of investigations into corporate and financial crimes is likely to rise sharply
Competition among the SCIA, police, and SJP is inevitable
Upgrade corporate compliance systems through ongoing expert advice and internal audits
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With the establishment of the Serious Crimes Investigation Agency (SCIA), the number of investigative agencies is growing. The Financial Supervisory Service and the Korea Fair Trade Commission are also significantly expanding their investigative and enforcement personnel, broadening their investigative powers. As a result, companies face greater legal risks than ever before.

During his time as a prosecutor, Kim Hugon, now head of Lee & Ko’s Criminal Law Group and a former chief prosecutor of the Seoul High Prosecutors’ Office, served as chief of the Seoul Central District Prosecutors’ Office’s Special Investigation Division 1 and as a senior research officer at the Supreme Prosecutors’ Office’s Anti-Corruption Department. Widely regarded as one of the prosecution service’s leading special investigation experts, he discussed how companies should respond when they are subject to investigations or inquiries.

Kim Hugon, head of Lee & Ko’s Criminal Law Group, delivers opening remarks at the seminar “How Will Investigative Structures and Practices Change in the Era of the Serious Crimes Investigation Agency, Prosecution Service, and Special Judicial Police?” held at Lee & Ko’s main building on September 29. Lee & Ko

-The criminal justice system has undergone major changes. What is the biggest change you have observed in practice?

▲Even before the outcome of an investigation, the question of where it will be conducted has become a risk. In the past, it was possible to predict whether a case would fall under the jurisdiction of the prosecution service or the police based on its nature. Now, it is difficult to tell which agency will investigate. This ambiguity and unpredictability have become fundamental risks for companies.

-There are predictions that the overall volume of investigations into companies will increase significantly.

▲An increase in investigative agencies and personnel will inevitably lead to an increase in the overall volume of investigations—in other words, a quantitative expansion of investigative activity. The biggest concern in this situation is the quality and expertise of investigations. In complex, specialized fields, investigations conducted without a proper understanding of the underlying mechanisms could become indiscriminate. The newly launched SCIA and other investigative agencies must devote themselves to developing the capacity for smart investigations that precisely target the problem, rather than aggressively pursuing cases to build up their performance records.

-With investigative authority now spread among agencies such as the police, the SCIA and special judicial police, what determines which agency will investigate major corporate crimes involving fair trade, capital markets, embezzlement, breach of trust and the leakage of industrial technology?

▲Competition for control of investigations appears unavoidable until the system is firmly established. Ultimately, the SCIA, which aspires to become a Korean version of the U.S. Federal Bureau of Investigation (FBI), is likely to take on the role of coordinator. The law provides for mechanisms such as the police’s obligation to notify the SCIA of certain serious crimes. However, until the lead investigative agency is determined, some competition among the SCIA, the police and the Special Judicial Police (SJP) is inevitable. The Financial Supervisory Service and the Korea Fair Trade Commission are also significantly expanding their investigative and enforcement personnel, so companies can expect their criminal legal risks to increase.

-There are concerns that investigations will be delayed as cases are passed back and forth between investigative agencies or between those agencies and the Prosecution Service, particularly now that prosecutors have lost their authority to conduct supplementary investigations. How should companies under investigation respond to minimize business disruptions from this risk?

▲The only way to reduce the risk of investigative delays is to establish a one-stop response system that covers the entire process, from the initial investigation through indictment. Delays caused by cases being passed back and forth have worsened since the 2020 adjustment of investigative powers, and the latest legal amendments make a more sophisticated response necessary. The longer an investigation takes, the more the risks borne by a company snowball, regardless of the outcome. Companies therefore need a system that mounts a consistent defense based on a single line of reasoning from the outset, rather than treating the SJP and Korea Fair Trade Commission stages, the police and SCIA stages, and the Prosecution Service stage separately. This is also likely to become an important criterion when choosing a law firm.

Kim Hu-gon, head of the Criminal Group and managing partner at Lee & Ko.

-With prosecutors no longer able to direct the execution of warrants, concerns have been raised about excessive searches and seizures and unreasonable warrant applications.

▲Companies should make use of the Prosecution Service’s judicial oversight function and respond strategically from the early stages of an investigation. The Prosecution Service is expected to exercise strict control over warrants in its capacity as a judicial overseer, rather than as the authority directing an investigation. Accordingly, companies should thoroughly contest various requirements from the warrant application stage, including procedural violations, unlawful investigations and whether grounds for detention have been substantiated, by presenting their arguments to the Prosecution Service. With the assistance of counsel from the outset, they should carefully examine every stage—from procedural issues to the degree of substantiation—and respond strategically.

-Amendments to the Criminal Procedure Act mean that facts verified by prosecutors and statements or materials obtained through interviews with complainants can no longer be used as evidence at trial.

▲In practice, trial prosecutors have become less able to submit to the court documents they have received directly from parties to a case. At trial, the admissibility of evidence obtained by prosecutors without investigative authority is being called into question. Until the system is revised, companies should ensure the integrity of newly obtained favorable statements and physical evidence—for example, by submitting them through the original investigative agency so they can be admitted as formal evidence. These issues are highly inconvenient and unreasonable from the public’s perspective, and the system should be improved promptly to address them.

-Some say that companies need to maintain a “consistent statement and position” from the investigative agencies, such as the police and the SCIA, through to the Prosecution Service, which decides whether to indict. Others say that defense strategies should emphasize different points depending on whether the agency is the SCIA or the Prosecution Service. What response strategy is needed in practice?

▲The details should be tailored to each agency, but the overall approach and framework for the case must remain consistent from beginning to end. Preparing practical response strategies tailored to the characteristics of each agency is absolutely essential. But if the underlying facts and logical structure are inconsistent, the entire case can fall apart. As I mentioned earlier, companies need a consistent response system covering both the investigation and inquiry stages and the indictment and prosecution stages, with a unified, consistent line of reasoning and defense strategy.

-Under the changed system, what should corporate legal teams and compliance departments prioritize in their preparations?

▲Companies should update their crisis management manuals and establish systems for managing digital files and documents to prevent unnecessary risks. Rather than relying on the old, linear approach involving the police, prosecution service and courts, they should build systems in advance to identify the risks posed by each agency under the new system and determine what they need to prepare for. In particular, companies should review and manage their routine data and document practices in advance in light of the amended law introducing attorney-client privilege (ACP) and changes in the digital forensics environment. They should do everything they can to prevent unnecessary risks before they arise.

Kim Hoo-gon, head of Lee & Ko's Criminal Law Group, delivers opening remarks at a seminar titled “How Will the Investigation Framework and Practice Change in the Era of the Serious Crimes Investigation Agency, Prosecution Office, and Special Judicial Police?” held at Lee & Ko's main building on September 29. Lee & Ko

-The law sets strict deadlines for exercising rights, including three months to challenge a decision not to refer a case for prosecution, 30 days to file an appeal and 90 days to request an SCIA investigative review. How should companies coordinate the speed of their internal decision-making?

▲Missing a deadline can permanently bar a company from seeking a remedy. Companies need systems that enable swift decision-making. As soon as a risk arises, the company’s legal team, its counsel at the law firm and its decision-makers should communicate directly and make prompt decisions. Companies should establish reporting procedures and systems for managing risks accordingly.

-The criteria for choosing a law firm or counsel seem likely to change under the new system. There are also concerns that costs will rise significantly compared with the past.

▲Rather than appointing counsel separately at each stage, companies should form a unified team from the outset and respond consistently. Appointing separate counsel for the police stage, the SCIA stage and the Prosecution Service stage will inevitably increase costs and could undermine the overall defense strategy and approach. Companies need to engage a law firm whose specialists at every stage can communicate as one team from the beginning and operate under a single chain of command.

-What advice would you give chief executive officers (CEOs) of companies facing potential legal risks under this new criminal justice system, where the costs of defending against investigations and the risks themselves have risen sharply?

▲The cost of dealing with a crisis after it occurs can be dozens or even hundreds of times greater than the cost of preventing it in advance. Companies should establish preventive risk management systems and safeguards to stop risks from arising in the first place. To prevent criminal legal risks from materializing, they should strengthen their compliance systems through regular advice from external experts, as well as internal consultation and audits. They should also update their data management systems in line with the implementation of the amended law on ACP.

-What institutional improvement is most urgent?

▲Supplementary investigations are not a privilege for prosecutors; they are a minimum safeguard for providing relief to people who have been wronged. Policymakers should move quickly to pass supplementary legislation, putting political dogma aside. The National Assembly should closely monitor the adverse effects the changed system may have in practice and make the necessary adjustments to ensure that the criminal justice system functions properly.

-Is there anything else you would like to say?

▲The prosecution service’s special investigations in the past were criticized for abuses such as targeting specific individuals and pursuing unrelated charges, which infringed on human rights. The SCIA, the police, the SJP and the Korea Fair Trade Commission should avoid excessive competition to investigate and work to earn public support through smart investigations that do not repeat the flawed practices of the past.

He is...

25th class, Judicial Research and Training Institute

Director of Information and Telecommunications at the Supreme Prosecutors’ Office

Chief of the Special Investigation Division at the Suwon District Prosecutors’ Office

Chief of the Special Investigation Division 1 at the Seoul Central District Prosecutors’ Office

Spokesperson for the Supreme Prosecutors’ Office

Senior Research Officer at the Anti-Corruption Department of the Supreme Prosecutors’ Office

Director of the Trial and Litigation Department at the Supreme Prosecutors’ Office

Director General of Planning and Coordination at the Ministry of Justice

Chief of the Seoul Northern District Prosecutors’ Office

Chief of the Daegu District Prosecutors’ Office

Chief Prosecutor of the Seoul High Prosecutors’ Office

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