A sentence in Korea

On Friday, February 8, a court in Seoul, Korea sentenced Paul Yoo to five years in jail on a charge of stock price manipulation. This was only half of what prosecutors had requested, but it still surely seems like a long time to Mr. Yoo.

I doubt that Mr. Yoo did anything to merit the sentence. Nonetheless, I won't go into a tirade about the tyranny of it all, etc. I understand the prosecutors' reaction to events fairly well at a human level.

It is what I remarked upon briefly yesterday, a natural reflexive oposition to the increasing prominence of the impersonal equity markets -- at the expense of the more personal 'Confucian' type of business dealings some in east Asia consider more of a cultural/regional strength.

With the rise of equity markets comes the thorough globalization of finance, and the demise of traditional ideas of sovereignty. With the rise of equity markets come mergers and acquisitions, proxy contests, and a general stirring of the pot. The stirring can be very productive, but if you're one of the vegetables inside, it can be scary too.

Lone Star Funds is an investment company headquartered in Dallas Texas. Five years ago it bought a controlling stake in the Korean Exchange Bank. At that time, Mr. Yoo worked for Lone Star, with the job of scouting out promising acquisition targets and reporting to Steven Lee, who was the highest-ranking Lone Star honcho in Korea.

The gist of the ostensible case against Yoo is that he made false public statements about KEB, and especially about its credit-card unit, KEB Credit Services, in order to make their financial distress seem greater than it was, drive down the share price, and ease the way for their acquisition by Lone Star.

You can find more on the subject in this Bloomberg story.