On February 1, the Seoul Central District Court found Mr. Paul Yoo, the head of U.S. private equity fund Lone Star’s South Korean operations (Lone Star Advisory Korea) guilty of manipulating the stock price of a credit card unit of KEB. Mr. Paul Yoo was sentenced to five years in jail and ordered to be immediately detained. Also the court ordered KEB and LSF-KEB Holdings SCA, a Belgium-based unit which holds Lone Star’s stake in KEB, to pay 25 billion won ($26.50 million) each in fines, saying both secured unfair profits as a result of the stock-rigging. Lone Star said it would appeal.

It was the first court verdict in a long-running legal battle between South Korean prosecutors and Lone Star’s South Korean operations. This case is important because it could affect British-based bank HSBC’s plan to pay $6.3 billion for a majority stake of KEB, a deal which is pending regulatory approval.

But the regulatory Financial Supervisory Commission said it would delay a decision on Lone Star’s status as a top shareholder in KEB and on approving a sale of the bank until all legal issues over the fund are resolved. Actually Lone Star is fighting back to the Korean prosecutors in 2 legal trials. This case is one part of them, and the other trial involves a former finance ministry official and a former CEO of Korea Exchange Bank where prosecutors alleged that the 2003 KEB sale to Lone Star was illegal. The second trial is still on trial.

Here is the original news article.

© 2008 Wonil Chung, a Korean Criminal Lawyer/Chung & Partners, a Korean Criminal Law Firm.  All rights reserved. Some copyrights, photos, icons, trademarks, trade dress, or other commercial symbols that appear on this post are the property of the respective owners.