South Korea indicts Hermes fund manager

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The Independent Online

Hermes Investment Management was indicted yesterday for alleged share price manipulation in South Korea.

Prosecutors there asked Seoul Central Court to fine Hermes 7.3bn won (£4.3m), which they said equalled the profits the British fund manager reaped from manipulation of Samsung Corp shares. The court also issued a warrant for the arrest of Robert Clements, a fund manager who used to work for Hermes in Korea.

Hermes, which manages BT's £33bn pension fund, denied all allegations. Richard Bernays, its chairman, said: "We believe that Hermes has complied with Korean rules and regulations in all of our activities.

"We will continue to co-operate fully with the Korean authorities. At the same time, we will be reviewing the matter with our Korean legal advisers before determining our next step."

Prosecutors allege that Mr Clements manipulated the share price of part of the Korean conglomerate through an interview with a leading Korean daily newspaper in late November 2004.

In that interview, he claimed that Samsung Corp - a firm trading in goods made by other affiliates of the electronics conglomerate - was "undervalued" and could receive an unwelcome foreign takeover bid.

His comments allegedly prompted Korean private investors to pile in, driving the shares higher. Hermes then sold its entire 5 per cent stake, almost 7.8 million shares.

It was said that Mr Clements, who left Hermes in July and now works for the Israeli asset manager Great Eastern, also sold 8,300 preferred stocks held on his own personal account.

The Korean financial regulator, the Securities and Futures Commission, complained six months ago that Hermes pocketed 29.2bn won by manipulating the stock. But prosecutors said the British firm's gains were 7.3bn won, after fees were deducted.

Four Hermes bosses - including Mr Bernays and Tony Watson, the chief executive - were interviewed by prosecutors in the Korean capital in December.

Last month, Mr Watson said Hermes holds about £280m-worth of Korean assets and the company has no intention of pulling out of a country in which it has invested for two decades.

The Seoul Central Court will rule on the indictment within two months. Hermes will then have a week to appeal or to stump up any fine.