News

South Korean-based private equity funds have flourished since 2004, outshining overseas-based rivals such as The Carlyle Group and CVC, reports the Reuters news agency (20 Feb ’08). They are drawing investments from the country’s National Pension Service, military and teachers’ saving funds, and life insurance companies. Reuters adds that foreign funds have been hit by a public opinion backlash against foreign investors who snapped up distressed assets after the 1997-98 Asian financial crisis. At the beginning of February, the Seoul Central District Court found Lone Star, a Texas-based private equity firm, guilty of manipulating stock prices, and fined it 25 billion won ($26.5 million). The head of the firm’s South Korean operations was sentenced to five years in prison. Lone Star, which said it would appeal against the ruling, faces further charges in South Korea. Prosecutors claim that in acquiring Korea Exchange Bank in 2003, the PE firm conspired with government and bank officials to buy the bank at below market prices. Lone Star denies the charges. In an op-ed piece, The Korea Times newspaper pointed to a lesson to be learnt from the case: “If prudent regulations were in place in South Korea, the equity fund could not have acquired KEB at a fire-sale price and made illicit gains from the dubious deals.”