Archives for September 2008

Computer Security As Fraud Preventative

by Brendon Carr

Korea’s government has finally woken up to e-mail’s role in official communications, and banned government employees from the use of free web-based e-mail services for official duties, reports the Korea Times.

Additionally, the government is instituting more stringent data-security practices—controlling access to files on government servers, limiting the use of USB flash-memory sticks, and blocking connections to web-based file-exchange services like WebHard (http://www.webhard.co.kr).

After the spate of data-privacy violations this year, somebody must have tumbled to the vast quantity of private information stored on government computers, and how easy it is to scarf up that data. A two-gigabyte USB key (now sell for about $10) can pull off quite a caper.

Finally, they may be establishing a blacklist of sites inappropriate for government workers to access from work. The days of government-sponsored porn surfing may be at an end. (Thank Goodness for the private sector!)

It’s a bit surprising that it took the government so long to tumble to these measures—in particular, the e-mail address thing.

Imagine you got an e-mail from the Securities and Exchange Commission asking for your help with an official government investigation, but the guy who was writing asked you to reply to “bobsmith847@hotmail.com”. Who would go for that? Yet in Korea, it’s been a very normal practice.

The article quotes a government employee complaining that the free web-based services are easier to use than the government’s official systems. Surely ease of use is an issue. But for a country continuously engaged in a struggle against government corruption, the lax computer-security measures created a rather permissive environment for government crooks.

Last year we had a case where a government official used his @naver.com e-mail address in the course of his scheme to extort money from one of our clients. The official held an office with significant discretionary power over government approvals of a certain product, and was making life difficult for the client by what seemed to be an unreasonable interpretation of the sketchy rules applicable.

And then he sent them an e-mail from his private address suggesting that the problems the client was having were due to “not understanding the Korean market and business practice”, and further suggesting that the best way to solve the issues was to convert their local business to a joint venture with the official’s friend—“and then I can take care of you”. Whoopsie daisy.

He must have felt pretty secure writing that, since his office servers would have no record of the communication. Under the new rules, if implemented competently, he would have a somewhat harder time.

For Korea Law Blog readers managing a company in Korea, or legal counsellors supporting such businesses, here are some questions to ask yourselves:

There’s definitely a lot to think about here, and in our experience most companies don’t consider any of these issues until after getting hit by an employee fraud or data-theft disaster.

September 27, 2008 | Filed Under Employment Law | Leave a comment

Why Ambulance Chasing Doesn’t Pay in Korea

by Brendon Carr

This short bit in the Korea Times piqued my interest, as it illustrates why English-speaking lawyers aren’t standing by to right every wrong against Korea’s long-suffering foreign teachers of English:

Doctor Blames for Suicide Stemming from Wrong Diagnosis

A hospital is partially responsible for a patient’s suicide if the suicide was committed after a doctor’s wrong diagnosis, according to a court ruling Tuesday.

The Seoul Eastern District Court ordered the National Police Hospital to pay 15 million won ($13,000) in damages to the wife of a late patient, acknowledging a mistaken diagnosis by a doctor at the hospital affected the patient’s suicide decision.

In May last year, the doctor diagnosed the unidentified patient as having terminal stomach cancer. After a few days, the patient killed himself. A detailed examination, however, showed later that he had gastritis.

The wife filed a suit against the hospital, claiming her husband committed suicide from the shock of the diagnosis.

The court ordered the hospital to pay 15 million won.

“We recognize the wrong diagnosis influenced the patient’s decision to kill himself,” judge Park Kyung-gil said in the ruling.

“The patient himself is the most responsible for the suicide. But it seems that he had no other reasons to kill himself beside the erroneous diagnosis, as he had no mental illness related to suicide and was in no financial difficulty,” Park said.

The damages available in the case of shocking medical malpractice resulting in wrongful death were only W15 million (about US$13,000 at today’s exchange rate). Plaintiffs are responsible for nearly all of their legal costs (yes, the court awards money for “legal costs” to a successful plaintiff, but the costs award is based on a fanciful idea of what a lawyer should cost, rather than what a lawyer does cost), which means unless you’re able to represent yourself as a pro se litigant, careful cost-benefit analysis should be undertaken.

And, no, we don’t want to work on a contingency fee. Even 100% of W15 million doesn’t cover the cost of the trial.

September 24, 2008 | Filed Under Civil Litigation and Arbitration | 1 comments

Americans Overseas: Register and Vote

by Brendon Carr

[This entry will stay top of the page through Nov. 4.]

We all know this election is important. Every election for the Presidency is an important one, but perhaps this November is especially crucial.

As an American citizen overseas, you still have the right—and moral obligation—to vote for the candidates of your choice. If not your state elections, make sure to cast that federal ballot. Go to the Overseas Vote Foundation or the Federal Voting Assistance Program to register and request an absentee ballot to return by mail.

I have heard that FedEx will return the ballots free for Americans voting from Korea. But they have forbidden me from stating such, from providing you a link to their press release or any other confirmation of my understanding (stupidly, I forgot what big corporations are like and asked their corporate-communications department for permission). I recommend you contact FedEx directly to ask about their ballot-return service. It seems like a very patriotic thing for an American company to do for its country, and FedEx ought to be praised for this, no matter how weak and weaselly their corporate-communications department.

As for me, I’m voting for John McCain and recommend you consider the issues and the candidates carefully, before you vote for McCain your own self.

September 19, 2008 | Filed Under Uncategorized | Comments are closed

Some Lawyers Struggling to Make a Living

by Brendon Carr

The execrable Korea Times reports a polarizing legal community, where solo and small-firm lawyers struggle to survive and others—those in larger law firms—prosper. In other words, a real marketplace, with winners and losers. The current Korean legal market is a far cry from the not-too-distant past, when simply passing the bar exam was an achievement which more or less guaranteed a lifetime of prosperity and prestige.

Those days are over:

Last March, the Seoul Bar Association initiated a fundraising campaign after hearing the heart-wrenching stories of the wives of two late attorneys who had to peddle on the street to make a living.

“It was the first time funds were collected to help family members of deceased lawyers. It would have been unimaginable in the past. But it’s true now,” an association official said.

(Sounds like the Seoul Bar Association ought to commission a group life insurance policy for its members, similar to the American Bar Endowment project of the American Bar Association, and those run by state and local bar associations.)

In the tougher marketplace, the number of bankrupt lawyers is noted by the Korea Times as a new development, with “one or two” insolvent lawyers filing for bankruptcy in the Seoul District Court each year since 2006.

Apparently, the number of lawyers is increasing faster than the load of work available for them to do: The article says that the litigation caseload for attorneys has fallen by nearly half since 1997, from 57.2 lawsuits per year for the average solo practitioner in 1997, to 31.5 in 2007. With the number of lawyers projected to double over the next seven (7) years, this is a worrisome decline.

The figure of seven million Korean won is offered as the average per-case fee for these struggling lawyers, although in 1997 I think the number was lower. Anyway, W7,000,000 multiplied by 31.5 yields a gross annual income of W220,500,000. But it doesn’t go as far as you might think…

The article alludes to high overhead costs for these solos—needing to “hire two or three secretaries and a researcher, maintain an office and promote business”, which the Seoul Bar Association says costs about W15 million per month (W180,000,000 per year).

Now, I used to work in a small firm where I was intimately familiar with the costs. Let’s take a look at those numbers: Secretaries cost about W1,000,000-1,500,000 a month, while a good researcher costs about W2,000,000-2,500,000. Offices for these types of law firms down near the courthouse tend to be filthy holes in the wall, costing not more than W2,000,000-3,000,000 per month. So the overhead for salaries and rent could range between W6,000,000 a month on the low end, and W10,000,000 a month on high end.

“Promote business” is what’s killing these lawyers. Unaffiliated solo practitioners who have not worked as a judge or prosecutor, instead coming out onto the market armed only with a law license, frequently have to hire a non-lawyer broker to help them find cases—and these guys cost money. Usually a good broker demands a salary of W7,000,000-10,000,000 a month plus a share of the profits (although here we’re talking about no-profit law firms). Everybody knows it’s illegal, while at the same time the practice is completely ubiquitous. (In this respect it’s a lot like making foreign lawyers partners in the larger Korean law firms. There are a lot of ethnic-Korean, US-admitted lawyers who are partners—even owners—of Korean law firms.)

The need to hire a broker highlights a number of problems in the traditional Korean lawyer’s way of doing business.

First, the lawyer has to have a bunch of staff doing his job for him—in a traditional “high street” law office, the lawyer doesn’t actually prepare any case for trial, including interviewing clients and witnesses and writing briefs to be submitted to the court. His “researcher” does all of that, while the lawyer merely stamps his name on the papers and drops by the court a couple times a week. His license is really kind of a license to print money.

Because the world owes him a living, the Korean lawyer is relatively inert at the marketing-related activities of speaking, writing, and educating clients and potential clients about the law. Even in large law firms, it’s very difficult to get lawyers to focus on education-based marketing efforts.

(Okay, this is a little unfair—most lawyers, everywhere, are inert marketers. The difficulty in getting Korean lawyers to speak, write, and educate may be more pronounced due to the characteristics of their market, but this is not a problem unique to Korea.)

Furthermore, his tax obligation to the government is not rooted in the actual performance of his business. Because “lawyers are rich” and the fact that many individual clients might not request a receipt for cash payment, the National Tax Service assesses a turnover tax on the lawyer’s office, based on number of matters the lawyer handled—the court reports how many Powers of Attorney (necessary for appearance in a case) are filed by an attorney, and the NTS multiplies that number by its supposition of what the fee must have been. That becomes the lawyer’s taxable income as far as the NTS is concerned.

And finally—and most importantly—note that the Korea Times and the Seoul Bar Association keep talking about “cases”. A traditional Korean lawyer is merely a person who shepherds litigation matters through the court. No lawsuit, no work for the lawyer. However, in a more developed legal market, the lawyer is both an attorney and a counsellor at law—the lawyer provides planning and advisory services to help clients build their business and avoid legal entanglements. In the United States, something like 90% of the lawyers in practice work as counsellor-advisors, rather than as litigation attorneys. The underdevelopment of this segment of practice is what’s making these lawyers poor.

With the number of new lawyers projected to be competing in the future marketplace, the new law schools and the bar associations must begin preparing lawyers for the reality that the legal market is indeed a market—and help them understand how to compete in a market-based system. Not all lawyers are going to be good at it—in the United States, too, there are extremely wide variations in lawyers’ income, based on the fact that not everyone is good at business—but more of them will make it if they are properly educated and prepared by their profession.

September 1, 2008 | Filed Under Legal Market | 3 comments