Korean Court Clears Firm of Stock Manipulation
SEOUL — A South Korean high court cleared the American private equity firm Lone Star on Tuesday of manipulating the share price of the former credit card unit of the Korea Exchange Bank.
The ruling, rejecting an earlier decision, reduces legal uncertainties for Lone Star and is expected to clear the way for HSBC’s $6.3 billion purchase of the Korea Exchange Bank from Lone Star, a deal seen as a major test of the country’s openness to foreign investors.
While the stock price manipulation case is the only legal issue involving Lone Star directly, former government officials and bank executives still face accusations that Lone Star’s 2003 purchase of Korea Exchange Bank was illegal. A decision is expected by the end of the year.
“The main case is whether or not Lone Star bought K.E.B. on the cheap in collusion with various government officials. That hasn’t been resolved,” said Peter Tebbutt, a director of Fitch Ratings in Hong Kong, who added that Tuesday’s ruling might be an indication that the courts were leaning in Lone Star’s favor.
A lower court in February found both Lone Star and the head of Lone Star’s South Korean operations, Paul Yoo, guilty of driving down the share price of K.E.B.’s former credit card unit by spreading rumors to allow the bank to buy the unit at below-market prices.
But the Seoul High Court threw out the judgment, saying that Lone Star’s 2003 announcement of a possible write-down of the card firm was not giving out false information, but was rather one option it was considering.
“There is no evidence to prove Lone Star guilty of stock manipulation,” Koh Eui-young, judge of the Seoul High Court said in a court ruling.
Lone Star said in a statement that it was “very gratified” by the ruling.
HSBC reiterated the bank’s previous statement that it was committed to buying the Korean bank and waiting for regulatory approval. The British bank this month threatened to drop out of the deal unless regulatory approval was given by its offer deadline of July 31.
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