Seoul Court Rejects Appeal to Arrest Head of Lone Star Korea

Posted 22 November 2006 @ 07:54 am EET     Print     Reprint     E-Mail     Comments

SEOUL (AP) - A South Korean court said it had rejected an appeal by prosecutors to arrest the head of Lone Star Funds' Seoul office on charges of stock manipulation.

The Seoul central district court said it turned down a request by the Prosecutor General's Office to review a lower court decision rejecting an arrest warrant for Yoo Hoe-Won, president of Lone Star Advisors Korea.

It said such a court decision was not subject to appeal and prosecutors could instead go back to the lower court with a fifth request for an arrest warrant for Yoo.

The decision is the latest twist in a nine-month legal saga centred on the US fund's 2003 purchase of a 51 percent stake in the ailing Korea Exchange Bank for 1.38 trillion won (1.47 billion dollars).

Prosecutors are investigating allegations that, a month after buying KEB, Lone Star manipulated the stock price of the bank's credit card unit so it could be absorbed into the main bank more cheaply.

Judges last week granted prosecutors arrest warrants for two American Lone Star executives, vice chairman Ellis Short and general counsel Michael Thomson. Prosecutors say they will seek their extradition from the United States.

But judges refused to issue an arrest warrant for Yoo, saying he is unlikely to leave Korea or destroy evidence.

Prosecutors say Yoo's arrest is necessary for them to proceed with investigation into the allegations. They claim the US fund had spread false rumours of a capital write-down by the credit card unit so KEB could take it over more cheaply.

Lone Star strongly denies any wrongdoing.

Its chairman John Grayken on Friday told AFP the prosecutors are pandering to public prejudice against foreign investors by obtaining arrest warrants for two of its executives.

He hinted that the probe might force Lone Star to scrap a 7.4 billion dollar deal to sell KEB to South Korea's largest lender, Kookmin Bank.