Controversy Over Disclosure of Law Firm Advisory SNS Messages

Prosecution Submits Evidence in Court
Defense Objects, Claims Violation of Right to Counsel Assistance

In the trial related to market manipulation involving SM Entertainment under Kakao, a large number of law firm advisory documents and related meeting materials have been disclosed, causing a stir in the legal community. The prosecution submitted internal documents, seized during a search of a major law firm that advised Kakao during the SM Entertainment acquisition, as evidence in court. It is unusual for internal documents revealing the confidential relationship between a law firm and its client (company) to be disclosed in such detail during a trial. The defense team protested, claiming a violation of the right to legal counsel. Law firms are already concerned about a contraction in the advisory market.

On the 29th of last month, during the trial of former Kakao Chief Investment Officer Bae Jae-hyun on charges of violating the Capital Markets Act at the Seoul Southern District Court Criminal Division 15 (Presiding Judge Yang Hwan-seung), social network service (SNS) messages, emails, and advisory documents exchanged between Kakao and major law firms were revealed as evidence.

[Image source=Beomryul Newspaper]

The disclosure of materials occurred during the process of documentary evidence examination, which is a procedure to explain the evidence adopted by the prosecution. A significant portion of the disclosed materials was related to the law firm Yulchon.

According to the materials disclosed by the prosecution, Yulchon emphasized that Kakao was not involved in the management dispute between SM Entertainment’s management and its largest shareholder, former Chief Producer Lee Soo-man, in relation to the injunction against new share issuance last year. However, they also advised on ways to secure additional shares of SM Entertainment.

These materials were obtained when the Financial Supervisory Service’s Capital Market Special Judicial Police (Special Judicial Police) conducted a search of Yulchon in August last year in connection with this case. Two lawyers affiliated with Yulchon are under investigation by the prosecution for allegedly conspiring in market manipulation.

On this day, the prosecution also disclosed SNS messages and advisory documents sent by the law firm Sejong to Kakao during the Financial Supervisory Service Special Judicial Police’s investigation response phase. When advisory content from the criminal defense stage was also revealed, former CEO Bae’s side protested, claiming it infringed on the "right to receive legal assistance."

A lawyer from a major law firm said, "If a lawyer is involved in a crime, they would have no defense no matter how much they speak," but added, "However, since advisory services are sought to prevent illegal acts in advance, it is questionable whether advisory content can be considered evidence of a crime. If that is the case, who would confide in a law firm and seek advice?"

Lim Hyun-kyung, Legal Times Reporter

※This article is based on content supplied by Law Times.