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Korea Law Today

Business Law and News Perspectives from Seoul

The talented Mr. Kim.

Posted in Criminal law, Current events

Sometimes truth is stranger than fiction.

The Mirae Savings Bank scandal, which is gripping the nation this month, is extremely interesting for many reasons. I don’t have the time to go into it, but the English coverage is pretty complete, if you are interested.

Sill, I really want to talk about the fascinating Mr. Kim Chan-kyung–the chairman of the now suspended Mirae Savings Bank–a little more. He is apparently a world class con-artist, like something from the mind of F. Scott Fitzgerald or Matt Weiner.

According to reports, he begin his scandalous career when he was a young man. Kim Chan-kyung had only a middle school degree, but he pretended to be a student of Seoul Nat’l Univ. College of Law for four years. He attended the lectures, was the leader of a student group, had pictures taken in the gradation album, and met his wife from a prominent university in Korea all by pretending to be a legitimate student. A professor of Seoul Nat’l Univ. College of Law even officiated at his wedding.

It’s quite a story. You can read more here. I also mentioned Chairmen Kim (including his attempted escape from Korea) in my previous post.

Kim Chan-kyung in happier days.

I would hate to kick someone when they are down, but some of you may also be interested in this. Chairmen Kim’s son is infamous in his own right for what has been called the “crazy night Benz run.” What happened is his son (who was severely intoxicated) drove a Mercedes Benz first into one car and then two other cars as he tried to escape.

The police caught him and recommended his arrest to the prosecutor, but the prosecutor (oddly) refused to give an order for arrest.  The below Youtube video below shows a news report that sets out the whole sad scene. Unfortunately, I do not have video of Chairmen Kim’s attempted getaway on the Yellow Sea.

 

Smoking, drinking, gambling monks and Christian bankers on the lam.

Posted in Constitutional law, Current events

Jesus and the Rich Young Man (1879, Beijing).

The Korean Constitution establishes the principle of freedom of religion and separation of church and state. No one religion dominates in Korea, but instead there is an unbalanced peace among a plurality of religions, including traditional shamanistic beliefs. Buddhism and Christianity are most dominant. Recent events, however, have shaken their hold on the hearts and minds of Koreans.

Buddha’s birthday (Seokga tansinil), which is an important holiday in Korea, will take place later this month. But a leaked video of some Buddhist monks gambling tens of thousands of dollars at a luxury hotel–with cigarettes and booze in hand—may put a damper on the festivities. You can take a look at a video of the monk’s party here.

The monks are from the Jogye Order, which is the leading Buddhist order in Korea. The Jogye Order is famous for its conflicts with the self-identified Christian president Lee Myung-bak. Specifically, they have taken issue with President Lee over some social issues, but they seem most concerned about limited funding for temple stay programs (where tourists pay to sleep in a temple for a few days) and other Buddhist events and propagation efforts. They were also quite disturbed by the president’s alleged preferred treatment of Christianity, marked by his public prayer session where he kneeled down on national television.

Although the monks grabbed the headlines this week, the Christians have also had their fair share of scandals over the years. Most notably, there has been a series of embezzlement cases and a disturbing rise in abusive new religious movements (simply put, cults). There were even some unpleasant revelations this week about a well-known Christian businessman.

The Somang Presbyterian Church (which is located in one of the richest areas in Gangnam) has a membership list that reads like a who’s who of Korean political and academic life. For example, president Lee Myung-bak belongs to the Somang Church. Sadly, earlier this month, another one their most prominent members, Kim Chan-kyung, was arrested and charged with embezzlement, among other things.

Kim was the chairmen of the troubled Mirae Savings Bank. After an investigation uncovered massive corruption at the bank, Kim hired some Chinese gangsters to ship him out of the country. The Korean Coast Guard ended up catching him sneaking across the Yellow Sea on a little fishing boat. He was wearing sneakers and holding about 12 grand in cash.

I am worried that this post sounds judgmental. But I am more sad than judgmental. I understand, people make mistakes and no religion should be judged by the acts of a few outliers. But you would hope that those who identify with (or lead) a religious group would do so for more than networking purposes or image alone. You would hope for some level of sincerity.

It always amazes me that a religion whose founder said things like, “turn the other cheek” and, “it is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God” has so many followers who live by opposing creeds. And doesn’t Buddhism teach that desire and greed lead to sadness? I know my remarks are not original or particularly profound, but the disparity between belief and action lingers and is troubling.

I think that the cumulative effect of these types of news stories has been the erosion of faith in Korea, including the arguably positive elements of faith that have enriched many Korean communities–from the wealthy heart of Seoul and the Somang Church, to the peaceful temples in the mountains of Korea, and beyond to the groups of Korean Americans connected through small local churches in the U.S.

Today, most of the young people I know and work with identify themselves as nonbelievers. In fact, it is becoming increasingly popular to disdain religion. Following the story of the monks, you can hear the word “Joong” (중) being uttered more frequently, which is derogative slang for a corrupt monk.

This was not always the case. For those of you who have ever visited Korea, you know that the Korean version of Christianity was historically very successful, albeit a tad assertive. You may have witnessed the lines of preppy looking proselytizers who sometimes gather around subway exits wearing cross embossed sashes and handing out flyers. And I am still amazed by the super-sized neon crosses that dot the Seoul skyline at night. Marveling at the spectacle of these crosses is one of my earliest memories of Korea. Churches can be huge here too–I am talking Madison Garden like.

A church like a stadium. The Full Gospel Church in Yeuido.

As for Buddhism, the temples are as much part of the mountains in Korea as the moss, rocks, and trees. I love to visit the temples (especially at night) for a little serenity. It seems, however, that they are growing larger (and gaudier). It also seems that far less people are coming to worship and that more people are coming just to take pictures.

I better stop there.

One more recommendation before the weekend.

Posted in Current events, Foreign investment

If you like podcasts, you may want to consider downloading the Planet Money podcast from NPR. I have been legitimately enlightened by many of their episodes.

This week they had on Ian Bremmer of the Eurasia Group. He has written a new book, Every Nation for Itself: Winners and Losers in a G-Zero World. On the podcast he talks about the book. Mainly, following the Cold War and a period of U.S. dominance, who will be the winners and losers going forward.

I have not yet read the book, but based on the interesting interview, I want to check it out. Bremmer seems to be high on the United States, India, and parts of Africa. He seems to be really high on Canada and Brazil. He takes a decidedly negative view of the long term fortunes of China and Russia.

His take on China was particularly interesting. I found his comments about the potential impact of a Chinese equivalent of wikileaks  thought provoking. You can download the podcast here.  

Thank you to The Grand Narrative.

Posted in Korea Law Today, Nathan McMurray

www.thegrandnarrative.com

Of late, the very popular blog The Grand Narrative, which primarily addresses gender issues in Korea, has been linking to our humble legal/business news site. For example, recently The Grand Narrative (which is pretty cool name for a blog by the way) referenced my post on the popular Trickster podcast:

— See Korea Law Today for an analysis, where author Nathan McMurray (quite presciently) noted:

I know the whole modus operandi of the creeps is to be irreverent and provocative. But irreverence is only useful when it furthers, rather than hinders, the show’s goals. I am curious if these recent events will have any impact on the upcoming presidential election, where the conservative candidate will likely be a woman (Park Kun-hye, the daughter of Park Chung-hee, who I briefly mentioned here). Plus, this stuff is just not funny. If you insist on “working blue,” please make me laugh.

I just wanted to repay the honor and mention The Grand Narrative again. I read it every week, and it is a fine site. Even when I don’t agree with the views presented (and I often do agree), I appreciate the time and effort put into it by author James Turnbull. Please check it out.

Apple raises the white flag in Korea (sort of).

Posted in Antitrust/competition, Commercial transactions, Corporate law, Current events, Living in Korea, Telecommunications

Close up of Jasper John's White Flag from the New York Metropolitan Museum of Art.

The term “white flag” comes from the provocative headline used recently in an article from the  Korea Joongang Daily (중앙 일보). The piece was about the resolution of a dispute between Apple and the Korean Fair Trade Commission (KFTC) regarding Apple’s return policy.

The KFTC has authority over consumer protection issues as well as fair trade issues. Accordingly, it produces something called the Standards for Terms for the Resolution of Consumer Disputes. The standards require companies to replace a product that is found to be defective at any time during the month following purchase with a new product and not a used or refurbished product.

Apple’s global policy is different than the KFTC standards. Under Apple’s policy, defective products are replaced with refurbished products. Because of this, the KFTC said that Apple would need to change its packaging to feature a warning that its customer service standards are below the standards set by the KFTC.

Apple said nothing doing. Instead, they quickly changed their return policy for Korea. So if you buy a defective iPhone in Korea, you will now get a new one rather than a refurbished one.

Despite what some have claimed, I think the KFTC was not unfavorably targeting Apple in this case, and I think they were motivated much more by consumer sentiment rather than chaebol angst. Many Koreans love Apple products (at least for now). The only major complaint has been about Apple’s customer service policies.

That does not mean that Samsung and the rest are not still set on combating Apple on all fronts. Samsung in particular remains steadfast, but its efforts in the courts look increasingly like Waterloo. Of particular note has been Samsung’s repeated (and often desperate) disregard for court orders.

This week a judge in the U.S. banned Samsung from presenting evidence that it worked around an Apple patent because Samsung refused to produce its own source code. This left some commentators contemplating Apple’s inevitable court room triumph.

Regardless of what happens in the courts or in any regulator’s office,  I doubt that anyone is going to be really raising the white flag soon. Whether Apple likes it or not, Samsung’s products are not only doing a decent job of imitating (uh, I mean matching) Apple’s products, but Samsung is starting to innovate and create fun and fresh gadgets—the Galaxy Tab is pretty darn neat. And Apple continues to create products that even the most die hard Korean patriots lust after.

Here’s to hoping RIM can get back into the game in a meaningful way soon too. I have my eyes set on that Blackberry 10.

Preliminary approval given to three foreign firms.

Posted in Commercial transactions, Corporate law, Current events, Foreign investment, FTA, KORUS FTA

Picture from the 법률신문 (http://www.lawtimes.co.kr).

The Korean Ministry of Justice has given three foreign firms preliminary approval to set up shop in Seoul. They are London based Clifford Chance, Boston-based Ropes & Gray, and Los Angeles-based Sheppard, Mullin, Richter & Hampton.

The complete review will likely end shortly. This means that these three firms may be operating in Seoul by as soon as early September.

Losing face. The North Face hit with a huge fine for retail price fixing.

Posted in Antitrust/competition, Commercial transactions, Corporate law

Taeyang, of the super popular K-Pop outfit Big Bang, in full North Face regalia.

The North Face is very popular in Korea. Everyone from the K-pop idols to middle-aged hikers (which seem to be everywhere in this hiking crazed nation) love to sport puffy North Face jackets. In high school, North Face jackets are a status symbol, and kids have gotten beaten up and robbed for their North Face gear (à la Nike Air Jordan shoe thefts in the U.S during the 1990s).

North Face wanted to preserve their premium brand image, so they required their Korean retailers to charge higher prices. This is known as vertical price fixing or retail price maintenance. Retail price maintenance is almost always illegal in Korea and it is sometimes illegal in the U.S.—I will get into that below.

The Korean Fair Trade Commission has hit The North Face with a historically huge fine (5.2 billion KRW) for the practice. They said that the North Face’s price fixing hurt rival companies. They also said it hurt consumers by causing prices to rise.

So I know what you’re thinking. If people are willing to pay more, why can’t a brand demand that retailers set the price? Well, as with most legal issues (especially fair trade issues), volumes of text have been written about this subject. But please allow me to make an audacious attempt to try and break things down for you in a few paragraphs off the top of my head—never a good move for a lawyer.

Retail price maintenance arguably undermines the free market by taking the power from consumers to choose between low prices (outlet shopping) and higher prices (well staffed, well marketed, and well serviced shops). Retail price maintenance also arguably prevents cheapskate retailers from getting a free ride by banking off the marketing efforts of other shops and the brands.

Concerns about retail price maintenance led the U.S. Supreme Court (in 1911) of develop the “Dr. Miles Rule,” which said that minimum price fixing was per se illegal. That rule comes from a case where Dr. Miles ( a company that made sleeping pills) stopped shipments to retailers that discounted prices on Dr. Miles’s products.

In 2007, nearly 100 years after the Dr. Miles case (and several other fluctuations in the law), the U.S. Supreme Court overruled Dr. Miles in the Leegin Creative Leather Products case. In that case, Kay’s Closet, a retailer, sued Leegin, a purse maker, after Leegin refused to ship purses to Kay’s Closet because Kay’s discounted Leegin’s purses.

In the Leegin case, the Supreme Court held that Leegin had a right to set the price because other factors were at play, namely efforts to market the brand as a quality product through price maintenance and improved customer service. Further, the court said that because these and other factors are important, retail price maintenance must be considered on a case by base basis and is not per se illegal. In other words, even if a brand is practicing reiail price maintenance, it can compete for consumers in other ways.

We are still living in the aftermath of Leegin. Some retailers in the U.S. hate the case (this link will lead you to a great Wall Street Journal article on this topic from a  few years back). And although Korea often follows the trends in U.S. law, under the Korean Fair Trad Act minimum price fixing (retail price maintenance) remains illegal. Specifically, Article 29 of the Korean Fair Trade Act says that “business shall not practice retail price fixing.”

Lower court case tests the Korean version of the FCPA.

Posted in Commercial transactions, Litigation / dispute resolution

Above is maybe the most famous scene from maybe the most famous Hollywood film on corruption: On the Waterfront. “I could of had class. I could of been a contender.”

Last week I wrote a post about the Foreign Corrupt Practices Act (FCPA). Not many people know that Korea has now enacted its own version of the FCPA, which has an incredibly long and specific name: The Prevention of Bribery to Foreign Public Officials in International Business Transactions Act (the Korean Foreign Bribery Act).

The Korean Foreign Bribery Act is conceptually quite similar to the FCPA, but there are some differences. For instance, there is one exception that allows companies to escape liability if they used reasonable care to prevent their employees from bribing foreign officials. Among other things, the Korean Foreign Bribery Act also states that a person is only considered a foreign official if a foreign government owns more than 50% of the company for which they work or substantially influences the overall management of the company.

A recent case tested these two points. In the case, two individuals were charged for attempting to bribe the CEO of the Korean subsidiary of China Eastern Airlines. The court held that they were not guilty under the Korean Foreign Bribery Act; because it could not be proven that the Chinese government owned at least 50% of or substantially influenced the management of China Eastern Airlines. Also of note, the companies involved were not charged. Under the law, there is an exception that allos a company to avoid liability if they exercised reasonable care  to prevent bribery. It is not clear whether the prosecutor’s determined that this exception applied here.

As far as I know, this is the first case that deals with the Korean Foreign Bribery Act. But as I said before, you need to be up on this issue because of increased enforcement of the FCPA and local efforts to stamp out corruption.

Possibility of a Korea-China FTA continues to gain momentum.

Posted in China, Commercial transactions, Foreign investment, FTA, KORUS FTA

Now that the KORUS FTA is in place, China is pursuing its own FTA with Korea in full force. Most experts believe that this is not only an economic issue, but a political issue. China wants more influence on the Korean peninsula.

I would guess that a deal will eventually be worked out between the two countries. But the terms of that deal are another question. The Koreans seem intent to keep certain key items off the table, such as automobiles. And many in the Korean agricultural community see fighting the deal this as a life or death issue

Similar to the U.S. beef protests, one could easily imagine a day when large-scale protests are aimed at Chinese products. Koreans already seem incensed at the apparent poor quality of legally imported Chinese agricultural goods, such as Chinese Kimchi. Never mind the disturbing stuff that seems to slip through illegally, like macabre stamina capsules made from dead human babies.

Yeah, I know. It sounds some like some strange urban legend. People can be truly ghoulish.

Not so mad about mad cow.

Posted in Current events, KORUS FTA

Photo of cattle farming in the U.S. from 1909.

The U.S. detected the first case of Mad Cow Disease (bovine spongiform encephalopathy or BSE) in six years a few weeks ago in California.

In Korea, U.S. beef protests (which started immediately after the news broke) continued over the weekend, as did the random call to ban U.S. beef imports. But I can see that it is still for sale in  most places, and there seems to be much less interest in the protests than there was in 2008 when the issue first came to the forefront.

Sure, it is still a political issue here (as it was then), but your average Korean citizen does not seem nearly as engaged or enraged as they did  a few years ago.

Back then, I went downtown then to check out what was actually happening at the protests. It reminded me of a cross between how I imagine the 1968 Democratic Convention and Burning Man. Quite a scene.

For those of you who don’t know, BSE is a disease thought to be caused by feeding rendered cow carcasses (processed meat and bone) to living cows. BSE causes a cow’s spinal cord and brain to turn to sponge. It can be transferred to humans as Creutzfeldt–Jakob Disease through the consumption of food contaminated with the brain, spinal cord, or digestive track of an infected cow–scary stuff.

Because of the threat of BSE, in most parts of the world feeding rendered cow carcasses to living cows is now illegal, including Korea, which implemented a ban a few years ago and now tests for BSE–Korea did not perform regular tests previously.

From what I have heard, the cow in question was very old. Specifically, the cow was over ten years old, which is a Methuselah like age when it comes to cows. And as we all know, when people or animals age they become infirm in all manner of ways. In addition, this cow was a dairy cow, which posed little risk to the public.

Reportedly, 65% of Koreans don’t think U.S. beef is safe. I am not sure if this is a correct number or what the number is for Korean beef. But considering that Korea has not systematically tested for BSE for very long and that the incubation period can last up to ten years, avoiding excessive finger pointing is probably a good idea.

That being said, I think the Koreans (and everyone else) has a right to remain concerned about how livestock is raised. We don’t want, however, to become unhinged or polemic on either side. Remember when Oprah got in trouble for for expressing her concerns over beef? I think she said that her fears, “stopped me cold from eating another hamburger!” But a protest now and then can help keep everyone (Korea, the E.U., Australia, the U.S., and everyone else) on their best behavior.

Let’s just be reasonable and try not to beat up any young police conscripts in the process.