Background: South Korea’s social backlash

GE now finds itself in the middle of an increasing social backlash against the huge profits foreign investors make in Korea.

Perhaps the most high profile case involved Lone Star, the US private equity fund, which found itself at the centre of controversy over foreign investments in South Korea. The US fund significantly reduced its exposure to the country last month, selling some assets and scaling down its stake in Korea Exchange Bank, which it took control of in 2003.

Last month, Diageo Korea lost its license to import alcohol into the country and was fined Won290m after tax authorities found it was involved in illegal sales to unlicensed wholesalers.

Warburg Pincus was fined Won53bn by a South Korean court this year and the Korean head of the US private equity fund was sentenced to four years in jail for insider trading of LG Card shares.

Hermes Investment Management was cleared of charges that it benefited from manipulating the share price of Samsung in 2004 but it had to go through an extensive investigation by Korean prosecutors last year.

Deutsche Bank received a warning from South Korea’s financial regulator in 2005 for improper trading in derivatives and the bank’s Seoul branch manager was suspended from duty for one month.