With his retirement just several weeks away, Hana Financial Group chairman Kim Seung-yu has been accused of committing irregularities during his involvement in the group’s takeover of Korea Exchange Bank from Lone Star Funds.
A group of lawyers, professors and civic groups filed a complaint against the Hana Financial chief with the prosecution for breach of trust last Wednesday.
Hana’s 26 executives also face a criminal investigation as they were referred to the prosecution by the accusers ― which include the Minbyun, or Lawyers for a Democratic Society, and the Korean Professors Union.
“Lone Star raked in 4.7 trillion won ($4.12 billion) including huge management premiums (totaling 1.2 trillion won) by selling KEB shares. And it enjoyed hefty dividends by owning the bank despite its ineligible shareholder status,” they said in a statement.
The accusers said Kim committed a breach of trust as Hana paid higher than stock market prices for KEB.
“Hana also acknowledged the management rights of Lone Star though the fund lost its voting rights (on more than a 10 percent stake in KEB) in the wake of stock manipulation,” they said.
On the same day, the lawyers and professors filed at a Seoul court an injunction against Kim and the executives to nullify financial regulators’ endorsement of Hana Financial’s takeover of KEB.
They claimed that Lone Star was a non-financial investor, and therefore ineligible to own a Korean commercial bank under the nation’s banking laws.
A non-financial investor is banned from exercising its voting rights on more than a 4 percent stake in a local bank.
Despite the restricted voting rights, and the limits on ownership by a non-financial investor and stock rigging, the Financial Services Commission approved the deal trading a 51.02 percent stake in KEB.
While Lone Star’s manipulation of stocks of KEB’s credit card affiliate was confirmed by a verdict at the Supreme Court, the FSC argued that the fund could not be classified as a non-financial investor.
Regarding the allegations that Hana Financial management was implicated in breach of trust, the financial group said that “nothing has been confirmed” in its regulatory filing on the stock market.
Hana added that it would reveal any additional information, according to the disclosure rules.
Meanwhile, the union of KEB has decided to withdraw their lawsuits on the FSC and FSC chairman Kim Seok-dong after reaching a compromise with Hana management in February.
Hana Financial promised to ensure KEB employees’ job security at least for a few years.
KEB employees are also expected to enjoy what financial officials view as high salaries for a certain period, while those for Hana Bank have stayed low.
By Kim Yon-se (email@example.com)