KEB officials face ax as watchdog cracks whipKorea’s financial watchdog is expected to hand down a heavy penalty on former and current board members of Lone Star Funds-controlled Korea Exchange Bank (KEB) to hold them accountable for stock price rigging related to the lender’s card unit, officials said yesterday.
The Financial Supervisory Service (FSS) has wrapped up an inspection into KEB and notified one ex-board member and three incumbent members at Korea’s No. 5 bank that they will face severe penalties, such as dismissals, officials said.
Those who will face punishment include Paul Yoo, the former head of the U.S. buyout fund’s local unit, who was found guilty of manipulating stock prices related to Lone Star’s 2003 merger of KEB’s card unit.
The FSS plans to send the case to its sanction review committee, slated for tomorrow, which is likely to impose a dismissal suggestion, the highest level of punishment for an executive at a financial firm.
The move came as the Financial Services Commission (FSC) 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 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 Korea if its deal to sell KEB to Hana Financial Group receives regulatory approval. Korea’s No. 4 banking group, Hana Financial, agreed to buy KEB for 3.92 trillion won ($3.38 billion).
Approval by the FSC is needed for the sanction deliberated by the FSS to be finalized. If the FSC confirms the penalty for those in question at its meeting slated for Dec. 28, KEB is required to hold a shareholder meeting within two months to implement it.
If the four officials receive punishment, they will be barred from holding executive-level positions at a financial firm for five years.
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.
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