Warburg Pincus’s Korea Chief Convicted

A South Korean court has convicted the director of Warburg Pincus’s Seoul office of insider trading and fined two affiliates of the firm more than $56 million.

Hwang Sung-jin was sentenced to four years in prison for using confidential information when selling shares of LG Card Co. Ltd., a credit-card company in which two Warburg Pincus affiliates owned a $370 million stake.

LG Card narrowly averted bankruptcy in 2004, and the Seoul Central District Court judge ruled that the Warburg Pincus affiliates traded on inside information to avoid heavy losses, selling nearly 6 million LG Card shares a year before the liquidity crisis became widely known, according to a Reuters report. Hwang was a former LG Card outside director.

Warburg Pincus’s two Malaysia-based investment affiliates, called Acorn and Pecan, were each fined Won26.5 billion ($28.2 million), bringing the firm’s total penalty to more than $56 million, according to reports.

In a statement, Warburg Pincus said Hwang and the firm complied with “all relevant laws and regulations.” It added: “We’re disappointed with the trial court’s verdict but continue to believe that the firm committed no wrong-doing.” The firm declined to comment further.

Hwang, along with an LG Card executive sentenced to three years for the same offense, remains free pending a likely appeal.

The ruling comes as foreign governments apply closer scrutiny to United States-based private equity firms. Last year, South Korean authorities charged executives of Texas-based Lone Star Funds with stock manipulation months before the firm planned to sell its 51 percent stake in a South Korean bank for a reported 3x profit.—J.H.