The founder of Genencell, a pharmaceutical company caught up in allegations that Democratic Party lawmaker Kim Seung-won lobbied on behalf of a COVID-19 drug, received a prison term on appeal and was taken into custody in the courtroom. The court found it clear that the founder, surnamed Kang, had used a broker to ask Kim to push for approval of a clinical trial, reversing the lower court's acquittal on the related charge. The ruling is also drawing attention for its potential impact on legal proceedings involving Kim.
The 7th Criminal Division of the Seoul High Court, presided over by Senior Judge Ku Hoe-keun, on the 30th sentenced Kang to four years in prison and a fine of 40 million won on charges including breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes. The penalty is heavier than the lower court's three-year prison term suspended for five years. The court ordered Kang detained in the courtroom, citing the risk of flight.
Kang was indicted on charges including submitting animal test data to the Ministry of Food and Drug Safety that had been falsified or had unfavorable findings omitted, in the course of obtaining approval for a clinical trial of a COVID-19 treatment Genencell was developing.
The trial court convicted him of submitting false data that made it appear a hamster infection experiment had been conducted when it had not. It also found him guilty of violating the Capital Markets Act by sharing undisclosed information about Sejong Medical's investment in Genencell with a broker surnamed Yang, and of breach of trust for having Genencell funds used to acquire 600 million won worth of convertible bonds issued by a company on Yang's side.
The appeals court upheld most of the lower court's guilty findings but reversed the acquittal on a charge of violating the Act on Regulation and Punishment of Criminal Proceeds Concealment. At issue was whether the 600 million won paid to Yang's side was a legitimate investment or compensation for lobbying Kim to secure clinical trial approval.
The trial court held that it was difficult to conclude there had been an improper solicitation based solely on the fact that Yang had asked Kim to expedite the matter. It also cited the fact that Kang and Yang had been discussing investment and joint business ventures before the request involving the drug safety ministry.
The appeals court, however, found a clear quid pro quo between the request for clinical trial approval and the 600 million won. "It is clear that the defendant solicited the Ministry of Food and Drug Safety for clinical trial approval through Kim Seung-won," the court said. "In return, 600 million won was paid to Yang, and the form of a convertible bond acquisition was used to make it appear the money had been obtained legitimately." The court recognized the full 600 million won as compensation for brokering and solicitation.
On the submission of false data, the court said: "Drug development carries the risk of harming life and safety, so a high level of care was required, yet false data was submitted solely to obtain quick approval for the clinical trial." The court also found that Kang had sought to inflate the prospects for the new drug amid the national emergency of COVID-19 in order to drive up the share price and reap large profits, and that investors suffered losses as a result.
The appeals court's findings are expected to affect the investigation and trial proceedings involving Kim, who was recently nominated as justice minister before withdrawing. Prosecutors in 2024 acknowledged that Kim, at Yang's request, had asked then-Minister of Food and Drug Safety Kim Ganglip to expedite approval of Genencell's clinical trial and had agreed to receive 5 million won in political donations in return. But they suspended the indictment, citing factors including the fact that the donation was never actually delivered and that the trial court in Kang's case had found it difficult to conclude there was an improper solicitation.
The case was also a point of contention at Kim's confirmation hearing for justice minister on the 15th of this month. Kim said at the time that he had merely passed along a constituent request rather than made an improper solicitation, and that he had not improperly intervened in the review of the clinical trial. The related legal proceedings are still under way.
Kang and Yang face a separate trial on charges including soliciting clinical trial approval through Kim and agreeing to provide 5 million won in donations in return. Kim has denied making any promise of donations and has filed a constitutional appeal seeking to overturn the suspension of his indictment.
A lawyer and former senior judge said the existing decision to suspend Kim's indictment would not be immediately overturned, but added: "The appeals court's finding that 600 million won was paid to Yang in return for the solicitation will inevitably be examined in related cases going forward."
