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Kim Byung-ju, Chairman of MBK Partners (Photo courtesy of Yonhap News) |
[Alpha Biz= Paul Lee] South Korean prosecutors investigating the Homeplus case have sought arrest warrants for Kim Byung-joo, chairman of MBK Partners, the country’s largest private equity firm.
According to the Seoul Central District Prosecutors’ Office on January 7, the Anti-Corruption Investigation Division 3 filed arrest warrant requests against Kim, as well as Kim Kwang-il, vice chairman of MBK Partners and chief executive officer of Homeplus; Kim Jung-hwan, a vice president at MBK Partners; and Lee Sung-jin, chief financial officer of Homeplus. The suspects face charges including fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and violations of the Capital Markets Act.
Kim Kwang-il, Kim Jung-hwan, and Lee Sung-jin are also accused of manipulating audit reports, in violation of the Act on External Audit of Stock Companies.
Prosecutors allege that MBK Partners’ management and Homeplus executives were aware in advance of an impending downgrade of Homeplus’s short-term credit rating but nevertheless proceeded with the issuance of short-term debt securities. Homeplus issued 82 billion won ($approximately USD 62 million) worth of asset-backed short-term bonds (ABSTB) in February last year. Just three days later, the credit rating was downgraded from A3 to A3-, and on March 4, Homeplus filed for court receivership.
Following the commencement of rehabilitation proceedings, the bonds’ credit rating fell sharply, rendering them virtually worthless and causing investors to suffer losses totaling hundreds of billions of won.
Prosecutors reportedly secured evidence through searches and seizures indicating that MBK Partners and Homeplus management had anticipated the credit rating downgrade in advance. Investigators suspect that the bond issuance was carried out despite prior planning for corporate rehabilitation, thereby misleading investors.
The prosecution said it completed questioning of key suspects and witnesses by December last year. Investigators also claim to have obtained multiple records indicating that Chairman Kim received reports on Homeplus’s business operations.
MBK Partners has denied the allegations, stating that prosecutors have “significantly misunderstood the intentions and actions of the controlling shareholder, which sought to revive Homeplus,” and described the investigation as “excessive and unjustified.”
Chairman Kim, a U.S. citizen, previously testified before the National Assembly in October, stating that he was not involved in Homeplus’s management. Kim Kwang-il also told lawmakers that MBK Partners had not been aware of the impending credit rating downgrade and that the decision to seek court rehabilitation was made only after the downgrade occurred.
The investigation began in April last year after the Financial Supervisory Service referred the case to prosecutors. Chairman Kim has been subject to a travel ban since the early stages of the probe.
A court hearing to review the arrest warrants is expected to take place early next week.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
