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The Seoul High Court on Tuesday cleared Lone Star Funds on appeal of stock manipulation in its controversial takeover of Korea Exchange Bank in 2003. It freed Yoo Hoe-won, the head of Lone Star¡¯s Korean unit, whom a district court had sentenced to five years in jail for spreading false rumors that a capital reduction of the credit card unit of Korea Exchange Bank was imminent so the private equity fund could take it over at a knockdown price.
The court also cleared KEB and Lone Star, which were earlier fined W25 billion (US$1=W1,034). The ruling met with protest from small investors, who suffered losses from the drop in the stock price of KEB Card.
Last year, the Supreme Public Prosecutor's Office indicted the Lone Star Korea head for stock manipulation when Lone Star was taking over the credit card unit of KEB. Yoo was also found guilty at first instance of having earned about W12.37 billion in excessive profits from the takeover procedure based on lower stock prices and causing losses to small investors, who held a 31.4 percent stake in KEB Card.
The high court overruled the earlier verdict saying the charge that he spread false rumors is ¡°not convincing." The Central Investigation Department of the Supreme Public Prosecutor's Office pledged to appeal to the Supreme Court.
However, the prospects for Lone Star¡¯s plan to sell KEB to HSBC remain dim. Lone Star signed a sales contract with HSBC Holdings in September last year, and the period has been extended until the end of July this year.
But the Financial Services Commission said it will not immediately give the green light for the sale. "Lone Star received a not-guilty verdict in the appeals court, but as prosecutors have pledged to appeal, there remains further legal procedure,¡± FSC spokesman Yoo Jae-hoon said. ¡°At this moment, it's not appropriate to go ahead with the sales procedure."
Chances are slim that HSBC and Lone Star will maintain the sales contract if the government continues to withhold approval. If the contract is canceled, experts speculate Lone Star will probably sell its KEB stake piecemeal, rather than seeking a new potential buyer for the whole majority share.
(englishnews@chosun.com )
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