By Kim Jae-won
Paul Yoo, former head of Lone Star Advisor Korea, a now closed local unit of the Texan private equity firm, is caught between a rock and a hard place.
Yoo was given short shrift last week during his final testimony in his trial on charges of manipulating the stock price of a credit card unit of the Korea Exchange Bank (KEB) in order to help Lone Star buy KEB at a lower price.
He said, “I am innocent. I was not involved in any stock price manipulation. I believe the truth will finally be revealed as the One who watches in the heaven, knows the truth.”
Yoo has been under arrest as a flight risk since the court’s previous session in July and last week a heavy 10-year imprisonment was requested by the prosecutors. His case was overturned by the Supreme Court and was remanded to the Seoul High Court.
There is no knowing whether Yoo was communicating with Lone Star but one certain thing is that the Texan firm will pack up and leave Korea as soon as its sale of the controlling stake in KEB is completed.
Yoo was initially sentenced to five years’ in jail by a Seoul district court in February 2008 for spreading false rumors of a capital reduction at KEB Credit Service (KEBCSD) in 2003 to help KEB buy the company’s shares cheaply.
But, he was cleared of the charges in the appellate court in June of the same year. However, the Supreme Court overturned the case in March this year, and the Seoul High Court is currently reviewing the case. The final ruling will be made on Oct. 6.
Richard Wacker, former CEO and chairman of KEB, also testified for Yoo at the court saying KEBCS was not quite attractive to buy.
“I don’t think for economic reasons that rational investors would buy it for 1.3 trillion won,” said Wacker, who now leads a local bank in Hawaii.
Legal experts say that it is most likely that Yoo will be sentenced to a jail term because the appeals court is obliged to follow the Supreme Court’s decision to find Yoo’s guilt.
Yoo’s conviction may put the brakes on the pending Lone Star-Hana deal. By Korean law, an entity is automatically convicted of a crime, when its head is found guilty. Also, Korean Banking Law deprives major shareholder status of a bank, which was convicted of an economic crime for the past five years.