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Citigroup raided in Seoul over KEB sale

South Korean prosecutors have raided the offices of a Citigroup unit in the capital Seoul as part of an investigation into the US-based equity fund Lone Star, Korean authorities have confirmed.

The investigation is looking into the sale of Korea Exchange Bank (KEB) to the fund, which bought a 50.5 per cent stake in 2003 – a deal that Citigroup Global Markets was involved in.

The probe follows claims that KEB's financial problems were exaggerated in order to speed up the sale of the bank.

"Citigroup Global Markets acquired the securities firm Salomon Smith Barney (SSB), which managed the merger between KEB and its credit card unit, so the company is now a target of our investigation," explained Chae Dong-wook, one of the senior prosecutors involved, according to the Korea Times.

"We sent four prosecutors and 20 investigators to the company in the morning and retrieved three boxes worth of documents and a computer."

Lone Star has already agreed to sell over 70 per cent of its stake in KEB to Kookmin Bank, although this will be subject to the outcome of the current investigation.