The Accused was the representative director of Company A, which produced heavy machinery and exported to Europe, the Middle East, and Northern America. Company A suffered financial hardships due to the 2008 global financial crisis and the associated increase of the exchange rate, and the KIKO foreign currency derivative matter; Company A had to go through restructuring of its financial structure and rehabilitation during such period.

The fundamental policy of Company A was always to focus on cooperation with its vendors; based on such policy, Company A was able to overcome its crisis including rehabilitation with the help of its vendors. The vendors of Company A formed the finance management committee, established a new entity to serve as the manufacturer of Company A, and supplied to Company A and the new manufacturer to allow Company A in overcoming its financial crisis.

The business model of Company A was to first receive an order for the production of the final product, subsequently order subparts from its vendors, and then pay the vendors once it receives the payments for the final product. Therefore, as long as Company A could receive the payment for the final product, it was able to make payments for the subparts to its vendors. The vendors of Company A were well aware of such facts; as a result, despite Company A’s financial crisis, vendors were able to supply subparts to overcome Company A’s financial crisis.

Victim which was one of the vendors of Company A also continued to supply to Company A to assist Company A overcoming its financial crisis. In the process, Victim received its payments in the form of a promissory note issued by Company B, which was de facto operated by the Accused.

Victim had been doing business with Company A for more than 5 years prior to the transaction in question, and Victim’s representative director and directors had also participated in meetings of vendors to overcome Company A’s financial crisis. As a result, Victim was clearly aware Company A’s financial situation was not healthy at the time of the transaction, and was also aware Company B was de facto operated by the Accused, thereby in fact being the same company as Company A.

Notwithstanding the above, Victim brought accusations that Accused fraudulently represented Company B was financially stable unlike Company A, Victim was misled to supply subparts to Company A and received promissory notes issued by Company B. The district court held the accusations were reliable and held that the Accused was guilty.

DR & AJU represented the Accused at the appellate level. Through the cross-examination of the president of vendor and representative of the Victim, DR & AJU established (1) Victim was already aware based on its long-term relationship that Companies A and B were de facto the same companies, (2) Victim was one of the vendors of Company A continued to supply subparts to Company A to assist Company A overcoming its financial crisis and participated in the vendors’ meeting, (3) during the process Victim became more fully aware of Companies A and B and Accused, therefore, had no need to make such alleged fraudulent representations.

Thus, the appellate court held the Accused was not guilty and overruled the district court’s ruling, holding that the fraudulent representation of the Accused, misunderstanding of the Victim, disposal, and the fraudulent action did not have a causal relationship. The prosecutor thereafter appealed but the appeal was denied; the judgment of the appellate court became the final judgment.

This criminal case is a significant precedent where the appellate court overruled the lower court’s judgment and held the accused as not guilty; DR & AJU successfully argued and proved that the factors consisting of fraud which are the fraudulent action, misunderstanding of the victim and the causal relationship between the disposal and fraudulent action do not exist.