Warburg Pincus is the latest private equity firm caught in the limelight in South Korea over allegedly unsound practices. According to media reports, the head of Warburg Pincus in Korea, Hwang Sung-Jin, has been indicted by Seoul prosecutors over alleged insider trading in shares of credit card company LG Card in October 2003, shortly before the company experienced financial difficulty when consumer spending slowed.
The Seoul District Central Prosecutors’ Office is seeking a fine of 26.3 billion Korean won ($27.6 million) against two investment units set up by Warburg Pincus for alleged violations of stock trading laws, according to a Reuters report quoting a statement from the prosecutors’ office.
Asked for comment on the charge, Warburg Pincus declined.
“Two overseas investment firms, set up by Warburg Pincus and five other foreign funds, and the managing director of the two investment firms, Hwang, were indicted on Monday as they avoided losses by selling shares in LG Card, using undisclosed information about LG Card,” the prosecutors’ statement said.
According to the statement, Warbug Pincus invested a combined $370 million for what was then a 20 percent stake in LG Cards in November 2000. According to the Financial Times, most of the stake was sold in October 2003.
Warburg Pincus isn’t alone on the charge. A number of other shareholders of LG Card have also been indicted, and prosecutors are seeking a fine of 11.2 billion won against one of them, according to Reuters.
The indictment comes after another foreign investment firm, Hermes Investment Management of the UK, was charged earlier this year over allegations of share price manipulation during the sale of Samsung Corp.