"Lost Hundreds of Millions" Lee Kyung-kyu, Betrayed by a Trusted Ally

Unpaid Appearance Fee Agency CEO Receives Suspended Sentence for Embezzlement
Embezzlement of 14 Billion Won from Subsidiary to Parent Company
Consideration of Capital Injection to Overcome Management Crisis

The CEO of an entertainment company, who was involved in a controversy over unpaid appearance fees to affiliated entertainers such as broadcasters Lee Kyung-kyu, Yoo Se-yoon, and Jang Do-yeon, was sentenced to a suspended prison term on embezzlement charges.

Broadcasters Lee Kyung-kyu (left) and Jang Do-yeon (right). [Image source=Channel A·Instagram capture]

According to the legal community on the 24th, Judge Bae Seong-jung of the 11th Criminal Division of the Seoul Western District Court sentenced Ahn (57), who was indicted on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (embezzlement), to three years in prison with a four-year suspension on the 12th. Ahn, as the CEO of 'K Media' (tentative name), a company producing video content, is accused of borrowing and using funds from its wholly owned subsidiary 'K Stars' (tentative name), which manages broadcasting entertainers, to resolve the company's financial difficulties. It was confirmed that a total of approximately 14.1495 billion KRW flowed from the subsidiary to the parent company over 279 transactions from March 2016 to November 2020.

Ahn's side argued in court that "'K Media' and 'K Stars' were effectively operated as a single legal entity, and funds were transferred to overcome the management crisis of both companies." They explained that without this fund lending, it would have been difficult for the two companies to survive, so the fund transfer for the benefit of both companies should not be considered embezzlement.

However, the court ruled that the fund lending from 'K Stars' to its parent company only benefited the parent company and was unlikely to have helped the subsidiary's interests. Therefore, the fund lending was judged to be guilty. Although the parent company partially repaid the loan, the court noted that ▲interest was never paid beyond the principal ▲no collateral was set for the fund lending, which indicated that it was closer to arbitrary monetary circulation by the parent company rather than a typical monetary loan.

The court explained the sentencing by stating, "Due to the defendant's crime, funds became insufficient, and affiliated entertainers and employees did not receive their wages and retirement pay on time, with some still not receiving their rightful salaries." It added that some of them have continuously petitioned for the defendant's severe punishment.

However, the court also considered ▲Ahn's acknowledgment of the facts and responsibility for the damages to affiliated entertainers and employees ▲that although the two companies were separate legal entities, their operations and accounting management were related, and funds were used to overcome the management crisis ▲Ahn's side did not misuse funds for personal purposes ▲a significant amount of funds was transferred from 'K Media' to 'K Stars,' with the net difference of funds exchanged between the two companies not exceeding 1 billion KRW ▲and efforts to repay debts and pay salaries by investing personal and family assets.

Meanwhile, 'K Media' is an outsourcing production company that produced numerous entertainment programs such as KBS2's 'The Return of Superman' and 'Dogs Are Incredible.' 'K Stars' was the agency for famous entertainers including Lee Kyung-kyu, Yoo Se-yoon, Jang Dong-min, and Jang Do-yeon. It is known that all of them did not receive appearance fees amounting to several hundred million KRW. From September 2020, 'K Stars' began delaying payment of salaries including broadcasting appearance fees to its affiliated entertainers, and after going bankrupt the same year, it closed in September 2021. Some entertainers and employees affiliated with 'K Stars' filed civil lawsuits in 2021 and won. It is known that all of them did not receive appearance fees amounting to several hundred million KRW.