'Breach of Trust Charges' BBQ Yoon Hong-geun Forms 34-Lawyer Defense Team, Drawing Criticism

Concerns Over Franchisees' Sacrifice Due to Corporate Image Damage
Indirect Impact Possible on Chicken Price Increases and More

Yoon Hong-geun, former chairman of Genesis BBQ, has been indicted on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust) at the Suwon District Court Seongnam Branch. It has been confirmed that he assembled a large legal team of as many as 34 lawyers, raising concerns. There are worries that the enormous litigation costs will ultimately have a direct and indirect negative impact not only on franchise owners but also on consumers through increased chicken prices.

Yoon Hong-geun, former chairman of Genesis BBQ. Photo by Genesis BBQ

34 Lawyers Appointed from Law Firms Including Yulchon... Many Former High Prosecutors and Chief Prosecutors

On the 2nd, regarding the breach of trust accusation against Chairman Yoon, Asia Economy confirmed through the Financial Supervisory Service’s electronic disclosure system and Suwon District Court case search that Yoon appointed a total of 34 lawyers from law firms including Yulchon. Among them, many are known to be former high prosecutors or chief prosecutors.

In the legal community, the fact that he was indicted despite assembling such a legal team is seen as an indication that the charges against Chairman Yoon are quite solid. It is judged that the evidence proving the crime has been thoroughly reviewed. The Supreme Court has ruled, "If a company director lends company funds to a third party who has already lost the ability to repay the debt and fails to take reasonable measures to recover the claim despite being fully aware that the company will suffer damages, it constitutes a breach of trust by benefiting the third party and causing harm to the company."

Chairman Yoon’s breach of trust allegations became known when bhc filed a complaint against him and four others at the Seongnam Sujeong Police Station in March 2021. At that time, bhc stated in the complaint that the Yoon family had improperly lent tens of billions of won to a private company wholly owned by them, causing damage to the company, and that they requested an investigation to sound an alarm against wrongful ownership and management practices by failing to fulfill the duty of care of a good manager.

Chairman Yoon and four others are accused of causing damage to the company by improperly lending more than 8.3 billion won without collateral or guarantees to a private company wholly owned by the Yoon family.

In July 2013, Chairman Yoon established GNS Hinet, a multi-level marketing company wholly owned by him and his son, which operated at a loss until it ceased operations in 2016. However, Genesis, wholly owned by Chairman Yoon and his two children, lent about 7.1 billion won to GNS Hinet from 2013 to 2016 without reasonable measures to recover the claims, and BBQ lent about 1.2 billion won in 2016. Later, at the end of 2016, Genesis and BBQ gave up on recovering 6.3 billion won of loans to GNS Hinet by treating it as a bad debt provision, which caused financial damage to the company but appeared to benefit Chairman Yoon and others.

BBQ strongly denies Chairman Yoon’s breach of trust charges. BBQ stated, "This is an unfounded accusation filed by competitor bhc to slander BBQ, with no actual victims, no damage amount, and no social harm. We are confident that the legal process will prove our innocence."

However, criticism is growing over the costs associated with the large legal team and the damage to corporate value caused by the litigation, which could ultimately lead to sacrifices by franchise owners. A franchise industry insider pointed out, "In the franchise industry where coexistence with franchisees is important, breach of trust is unacceptable. Depending on the trial outcome, there are concerns that the loss of morality could negatively affect the industry."

Professor Seo Yong-gu of the Department of Business Administration at Sookmyung Women’s University said, "If disputes between companies drag on, their competitiveness declines and their value can be damaged. If the franchise headquarters are embroiled in litigation, the fatigue will be directly passed on to franchise owners, which can lead to negative consequences such as increased costs, ultimately causing aftereffects for consumers like chicken price hikes."