Korea frees Lone Star executive

Lone Star is trying to sell its stake in KEB to HSBC

Texan private equity firm Lone Star has been cleared of rigging shares by a South Korean appeals court.

The judge cancelled fines and overturned a five-year jail term imposed by a lower court on Paul Yoo, the head of the firm's Korean unit.

In 2003, Lone Star bought a 51% stake in Korea Exchange Bank (KEB), worth about $1.5bn (£76.3m)

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

The court upheld a two-and-half year suspended sentence against him for other minor offences.

Prosecutors may appeal against the ruling to the Supreme Court of Korea, the country's highest court.

Lone Star has maintained it did nothing wrong.

The ruling may help Lone Star to sell its KEB stake to HSBC in a $6.3bn deal, which has so far been stalled because of the legal dispute.

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.