Korea jails Lone Star executive

Texan private equity firm Lone Star has been found guilty of stock price manipulation by a South Korean court.

The Seoul court fined the Dallas-based company $27m (£13.6m) and sentenced Paul Yoo, the head of its Korean unit, to five years in prison.

In 2003, Lone Star bought a 51% stake in Korea Exchange Bank (KEB), which was also fined $27m by the court.

Prosecutors charged Mr Yoo with driving down the stock price of KEB’s former credit card unit by spreading rumours.

Lone Star, which insists it did nothing wrong, bought its holding in KEB for about $1.5bn.

Its legal problems are obstructing a $6.3bn deal to sell its holding in KEB to HSBC.

The South Korean government encouraged private equity funds to take stakes in some of the country’s debt-laden banks in the aftermath of the Asian financial crisis.

However, there is some negative sentiment among Koreans toward foreign investors that have profited from taking stakes in distressed companies.