A decision handed down by the Constitutional Court of Korea on April 28, 2011 should give strong pressure to the Korean Financial Supervisory Commission (FSC) to approve Hana Financial Group’s purchase of the 51% stake Lone Star holds in Korea Exchange Bank (KEB).
Last month, the Korean Supreme Court reversed and remanded the decision of the Seoul High Court to acquit an executive of the fund of market manipulation charges. The holding motivated the FSC to hold up approving the sale based on, in part, the fact that in Korean law a guilty employee may establish, in some cases, that an employer is vicariously guilty.
The employee was accused, in short, of conspiring with government workers and others to deflate the value of the shares of KEB credit card before the merger of the credit card unit with KEB.
Under law, the employer may be held criminally accountable for the actions of the employee.
The Constitutional Court to benefit of Lone Star ruled that the penal provisions holding an employee and employer jointly criminally culpable for the actions of an employee is unconstitutional.
The case will likely pave the way for a ruling by the FSC that approves Lone Star as being “fit” to sell its shares to Hana, since it seems no other hurdles are in place.
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