Court clears Lone Star boss of manipulating stock price

By Bomi Lim  |   2008-6-25  |     NEWSPAPER EDITION

LONE Star Funds and its South Korea chief Paul Yoo were yesterday cleared of stock price manipulation in an appeals court ruling that may help the United States company's planned sale of Korea Exchange Bank to HSBC Holdings Plc.

Judge Koh Eui Young of the Seoul High Court overturned a February 1 ruling that sentenced Yoo, 57, to a five-year prison term for allegedly driving down the price of shares in a Korea Exchange Bank unit to buy it cheaply. The court also cleared Korea Exchange Bank.

Regulators have withheld approval of HSBC's proposed purchase of Korea Exchange Bank for US$6 billion until legal disputes are resolved. The delay has fed the perception of hostility to foreign businesses in Asia's fourth-largest economy, where direct investment from abroad has fallen for the past three years.

"Regulators are running out of excuses for delaying the approval," Mo Jae Sung of Hanwha Investment Trust Management Co told Bloomberg News before the ruling. "It will still be a long process for the disputes to settle completely with appeals, and HSBC can't wait around forever."

Prosecutors may appeal against yesterday's ruling to the Supreme Court of Korea, the nation's highest court, within seven days.

Yoo had been accused of distributing false information of a possible capital reduction to drive down the stock price of Korea Exchange Bank's credit card arm in 2003. There was no evidence to prove the capital reduction plan was not genuine, the judge said yesterday.

HSBC, Europe's largest bank, has hinted it could walk away from the plan to buy 51 percent of the lender.

"We would hope that the Korean government will now be able to approve our application," said Vinh Tran, an HSBC spokeswoman in Hong Kong. Korea Exchange Bank and Lone Star welcomed the ruling. HSBC has set July 31 as a deadline to complete the deal.