Court upholds 3-yr prison term for ex-head of Lone Star’s Korean unit

The Supreme Court upheld a lower court's three-year prison term for a former head of U.S.-based buyout fund Lone Star Funds' Korean unit on Thursday for manipulating stock prices of the credit card unit at Korea Exchange Bank (KEB) in 2003 in order to buy up the card firm on the cheap.

The Seoul High Court delivered the prison sentence for Yoo Hoe-won, also known as Paul Yoo, in October for announcing a false plan. He said Lone Star would carry out capital reduction on the credit card firm in 2003.

Thanks to the negative market speculation, the firm's stock prices plummeted, enabling the local unit, LSF-KEB Holdings, to take over the company for a below-market price.

The credit card firm was later delisted and merged with Korea Exchange Bank (KEB), which Long Star's local unit acquired earlier in 2003.

"The announcement of the plan to merge KEB's credit card unit and reduce its capital constitutes a deceptive scheme designed by the executive of the Lone Star in order to gain illegitimate profits in stock trading," Supreme Court Justice Jeon Su-an said in his verdict. KEB and its biggest shareholder Lone Star pocketed financial gains from the scheme, according to the records.

In the same ruling by the Seoul High Court, LSF-KEB Holdings was fined 25 billion won ($22.3 million) for issuing the false market speculation but did not appeal the decision.

The Supreme Court's sentence on Thursday also confirmed the lower court's guilty ruling over Yoo's tax evasion of 2.1 billion won as well as infliction of 24.3 billion won in losses to a joint firm between the bank and his firm.

It also upheld a fine of nearly 4.3 billion won, ordered by the lower court along with the prison sentence.

KEB, meanwhile, was ruled not guilty in Thursday's decision for its suspected participation in the stock manipulation scheme, as acquitted by the Seoul High Court in October.

The final decision by the top court followed mixed rulings by previous courts. Yoo received a five-year prison term from a district court, but the Seoul High Court overturned it and handed out a suspended prison term.

And then the Supreme Court dismissed the lower court's partial not-guilty decision and sent the case back for a retrial in 2011. In October, the high court then handed down the three-year prison sentence.

Lone Star is set to transfer its controlling stake in KEB to Hana Financial Group Inc., the country's fourth-largest banking group, reaping massive profits from its decade-long ownership in the lender. (Yonhap)