Arrest of Korean buyout pro sought

Byeon Yang-ho, managing director and founder of South Korean buyout fund Vogo, is the latest private equity professional to feel the heat from the country’s authorities.

A warrant for the arrest of Byeon Yang-ho, the founder of South Korean buyout firm Vogo, was issued last week, according to a report in Reuters.

The report said Yang-ho was detained for questioning last Monday in relation to his former role as a high-ranking official in the South Korean Ministry of Finance and Economy. Two days later, the Seoul Central District Court issued the arrest warrant.

The warrant is understood to result from Yang-ho’s possible involvement in a cash-for-favours scandal at Hyundai Motor, the South Korean car manufacturer. Hyundai chairman Chung Mong-Koo is currently on trial for allegedly setting up slush funds and bribing government officials.

The report quoted a “senior Vogo official” as saying that Yang-ho denied the allegations against him.

Vogo was launched last year and has so far raised around 511 billion won ($530 million) on its way to a final target of $1.5 billion for its debut fund. In March this year, the firm signed a preliminary agreement to buy a majority stake in credit card processing firm BC Card and recently agreed to invest 120 billion won in Tong Yang Life Insurance Co.

The move against Yang-ho follows a series of investigations into the activities of foreign private equity firms operating in South Korea.

The most high-profile of these has involved Lone Star, the Dallas-based investor being scrutinised for possible malpractice in relation to its 2003 acquisition of Korea Exchange Bank. Responding to the ongoing investigation, Lone Star managing partner John Grayken claimed in a recent press conference that the investment climate in South Korea was “anti-foreign”.

Grayken’s view is by no means unorthodox. A report earlier this year in the Korea Times said that homegrown funds like Vogo were expected to assume the role of protecting management control of domestic companies from the ‘risk of hostile foreign acquisitions’.

Contrary to such observations, it appears the war against private equity professionals is also now being waged on the home front.