Seoul courts rules 2003 KEB sale to Lone Star legal
Reuters - 1 hour 41 minutes ago
SEOUL, Nov 24 - A Seoul court on Monday rejected claims that the 2003 sale of Korea Exchange Bank to Lone Star was illegal, clearing a former government official and former top executives of the bank of wrongdoing.
The verdict is the first judgement in two years after prosecutors said officials involved in the $1.2 billion sale of KEB <004940.KS> to the U.S. private equity house [LS.UL] had understated the bank's value so that it was sold for about a third less than it was worth.
The legal battle is separate from a previous case settled in June that cleared Dallas-based Lone Star and the head of its South Korean operations of charges of manipulating the stock price of a former credit card unit of KEB to buy it cheaply.
"We cannot judge that the capital ratio estimate for KEB had been manipulated to lower the acquisition price or make Lone Star eligible to buy the bank," Yonhap news agency quoted a judge at the trial as saying.
A judge representing the Seoul Central District Court's criminal trial division confirmed the ruling, but declined to be named because he did not hand down the verdict.
Shares of KEB responded positively to the news, rising as high as 7.6 percent at one point, against a slight fall in the wider market.
The ruling may end a long-running debate on whether KEB was sold at far below-market prices, which had been delaying Lone Star's planned sale of KEB.
South Korean regulators have withheld approval of Lone Star's previous two attempts to sell control of the domestic lender, citing legal uncertainties.
In September, HSBC <HSBA.L> <0005.HK> walked out of a $6.3 billion offer to buy 51 percent of KEB from Lone Star, a year after agreeing to acquire the stake, blaming turmoil in financial markets.
Byeon Yang-ho, a former finance ministry official, was cleared of charges of colluding with Ha Jong-sun, a lawyer hired by Lone Star, and KEB's then-CEO to inflate the bank's losses.
Prosecutors had indicted Byeon, Ha and two former KEB top executives on bribery charges linked to the 2003 KEB sale, saying Ha took more than $1 million from Lone Star to lobby Byeon, who received 41.7 million won worth of bribes from Ha.
Byeon has denied all the allegations.
The court also cleared Lee Kang-won, a former CEO of KEB, of his role in the sale of the bank, but handed him an 18 month jail sentence for taking bribes, the judge representing the court said.
"It is impossible to deny that the accused behaved in an inappropriate manner during the sale process of Korea Exchange Bank, but in the wider framework of the sale it is difficult to say that the accused intended or carried out embezzlement," Yonhap cited the court as saying.
The prosecutors' probe, prompted by politicians in early 2006, irked foreign investors who feared they could be the target of a growing backlash against heavy profits foreign investment funds have reaped by buying distressed Korean assets.
(Reporting by Kim Yeon-hee and Park Ju-min; Editing by Keiron Henderson and Jonathan Hopfner)
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