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S. Korean watchdog head gets 2 yr prison sentence for Loan Star bribes

August 13, 2015

SEOUL (Yonhap) — A local court sentenced the head of a private watchdog to two years in prison for taking bribes from Lone Star Funds in return for dropping protests over the U.S. firm’s local deal and trying to help it settle a stock manipulation trial.

The Seoul Central District Court ordered Jang Hwa-sik, the head of Spec Watch Korea, also to forfeit 800 million won (US$681,000), he received in 2011 from Yoo Hoe-won, former head of Lone Star’s local unit.

“Despite fairness and integrity expected for him as an executive of an organization whose nature is clearly of public concern, he used his position in taking the heavy amount of financial reward,” the court said.

Jang, formerly a head of the labor union at Korea Exchange Bank (KEB), had led protests against Lone Star’s profit taking in the firm’s purchase and reselling of KEB.

Lone Star bought KEB in 2003 for 1.38 trillion won after spreading false rumors of the bank’s plans of a capital reduction, which cut down the bank’s market price.

Lone Star later sold the bank to Hana Financial Group Inc., South Korea’s third-largest bank by assets, in 2012 for an extremely high profit margin of 4.7 trillion won.

When Yoo was undergoing a criminal trial over stock manipulation charges in 2011, Jang received the bribe in exchange for dropping his criticism and asking the court for leniency for the former Lone Star head.

Yoo was eventually sentenced to three years in jail in early 2012 for manipulating the share prices of KEB to buy it at below-market value.

In the Thursday ruling, Yoo was sentenced to a four-month prison term for offering the bribe, but his sentence was suspended for one year.