Korea's financial watchdog recommended Korea Exchange Bank (KEB) Wednesday to dismiss four board members from its major shareholder Lone Star Funds on charges of stock manipulation.
Following an inspection of the No. 5 lender, the Financial Supervisory Service said in an e-mailed statement that it asked KEB to dismiss one ex-board member and three incumbent members from the U.S. buyout fund for deteriorating the bank's financial health and disturbing market order.
The four board members, including Paul Yoo, the former head of the U.S. buyout fund's local unit, was found guilty of manipulating stock prices related to Lone Star's 2003 merger of KEB's card unit.
The move came as the Financial Services Commission on Nov. 18 ordered Lone Star to reduce its 51.02 percent stake in KEB to below 10 percent within six months. A court verdict that convicted the fund of stock price rigging led it to become an illegitimate major shareholder of KEB.
Paul Yoo was convicted of issuing a false capital reduction plan at KEB's card unit so as to make it easier for Lone Star to buy it at a cheaper price. He has denied the charge.
Lone Star, which bought KEB in 2003, is poised to leave South Korea if its deal to sell KEB to Hana Financial Group receives regulatory approval. South Korea's No. 4 banking group Hana Financial agreed to buy KEB for 3.92 trillion won ($3.39 billion).
Lone Star has drawn strong public criticism as many accuse it of trying to flee Korea after fattening its pockets.
Lone Star has already recouped profits of around 2.9 trillion won by receiving a series of dividends and selling part of its stake in 2007. Its original investment in KEB reached 2.15 trillion won.(Yonhap)