Report: Ex-Lone Star Korea head detained

Paul Yoo, former Korea head of US private equity firm Lone Star Fund, has reportedly been detained, boding ill for the firm’s pending sale of Korea Exchange Bank to Hana Financial Group.

According to a Reuters report, a Korean judge said Yoo was a flight risk and ordered him be arrested. The report also noted that defence lawyers filed an appeal for KEB seeking that it should not be arraigned on the same charges as Yoo and Lone Star.

Neither Lone Star nor KEB could be reached for comment.

Korea’s Supreme Court in March overturned the prior acquittals of Lone Star, KEB and Yoo over charges of misconduct and price fixing related to Lone Star’s original $1.3 billion investment made in 2003. That in turn seemed to prompt Korea’s Financial Services Commission (FSC) to fire up an investigation into whether Lone Star should have even been allowed to become a majority shareholder in KEB. 

The agreement to divest Lone Star’s 51 percent KEB stake to Hana in a KRW4.7 trillion deal was struck in November last year, but it has since been halted due to regulatory concerns.

In May this year, Hana was reportedly in talks with Lone Star to buy a 10 percent stake in KEB rather than the 51 percent interest in a move to keep the deal alive. A purchase of 10 percent interest or less would not need regulatory approval.

Earlier this month, the two parties agreed to cut the price of KEB to KRW4.4 trillion and extended the sale deadline to end of November.

It is unclear when the deal would be approved as Korean regulators would only rule on the sale until legal proceedings have been completed.