Government Partially Wins Lawsuit Claiming Delivery of Late Chairman Yoo Byung-eon's 'Nominee Stock'

Sewol ferry raised at Mokpo New Port, Jeonnam.
[Image source=Yonhap News]

[Asia Economy Reporter Choi Seok-jin] The government won a partial victory in a lawsuit filed with the court demanding the delivery of shares that the late Yoo Byung-eon, former chairman of the Sewol Group who had the Sewol ferry owner company as an affiliate, had entrusted to his close associates under their names.

According to the legal community on the 11th, the Seoul Central District Court Civil Division 17 (Presiding Judge Lee Sang-joo) recently ruled partially in favor of the plaintiff in the lawsuit filed by the government against Kim Pil-bae, former CEO of Moonjin Media, a close associate of former Chairman Yoo, and Lee Soon-ja, former director of Korea Pharmaceutical, demanding the delivery of shares, ordering "Kim, the former CEO, to transfer 10,400 shares of Dapanda stock he holds to the state."

However, the court dismissed the government's claim regarding the shares held by former director Lee, judging that there was insufficient evidence to recognize the name-trust relationship.

After the Sewol ferry accident occurred on April 16, 2014, the government spent enormous expenses on rescue operations and preventing the loss of victims, and under the Special Act on Relief and Support for the Victims of the April 16 Sewol Ferry Disaster (Sewol Victim Support Act), it also made advance payments of compensation to the victims of the accident.

Accordingly, in July 2017, the government filed a lawsuit demanding that former Chairman Yoo, who was held responsible for the Sewol ferry accident, transfer the Dapanda shares he had entrusted under the names of his close associates.

Meanwhile, in the trial of Kim Han-sik, former CEO of Cheonghaejin Marine, who was indicted on charges including professional negligence resulting in death related to the Sewol ferry accident, the court judged that the cause of the Sewol ferry accident was a combination of issues such as the stability problems arising from repair and extension works carried out to create a personal exhibition room for former Chairman Yoo, excessive loading, and poor securing (fixing cargo to the ship).

Accordingly, the government argued that former CEO Kim Han-sik and others are jointly responsible for compensating the victims of the Sewol ferry accident, and that former Chairman Yoo bears responsibility either for illegal instructions as chairman of Cheonghaejin Marine or as an employer.

Regarding the exercise of subrogation rights for costs already incurred, the government claimed that the victims or bereaved families of the accident can exercise the compensation claims against the heirs of former Chairman Yoo on their behalf under the creditor subrogation provisions of the Civil Act.

The court ruled, "Former Chairman Yoo neglected his duty to safely maintain and manage the Sewol ferry and to take necessary measures for safe navigation due to gross negligence," and "there is a causal relationship between this breach of duty and the sinking accident."

Furthermore, the court regarded the Dapanda shares held by former CEO Kim Pil-bae as effectively belonging to former Chairman Yoo and ordered the transfer of the share certificates to the state. Kim testified during a prosecution investigation in 2014 on embezzlement charges that the actual owner of the Dapanda shares was former Chairman Yoo.