Prosecutors investigating the "Homeplus case" moved to secure custody of MBK Partners Chairman Kim Byung-joo and other executives.

According to the legal community, the Seoul Central District Prosecutors Office's Anti-Corruption Investigation Division 3 sought arrest warrants on Jan. 7 for Kim, Vice Chairman Kim Kwang-il (co-CEO of Homeplus), Vice President Kim Jung-hwan and Managing Director Lee Sung-jin on charges including fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and violations of the Capital Markets Act.

Vice Chairman Kim, Vice President Kim and Lee also face charges of falsifying audit reports, in violation of the Act on External Audit of Stock Companies.

They are accused of issuing large volumes of asset-backed short-term bills (ABSTB) despite anticipating a downgrade in Homeplus' credit rating, then suddenly applying for corporate rehabilitation, causing losses to investors.

Korea Investors Service downgraded Homeplus' credit rating on Feb. 28 last year to A3- from A3. Homeplus applied for corporate rehabilitation proceedings at the Seoul Bankruptcy Court on March 4, four days later.

After receiving the case from the Financial Supervisory Service under a fast-track emergency measure, prosecutors intensified the investigation last April by raiding Homeplus' headquarters, MBK's headquarters, and the residences of Kim, Vice Chairman Kim and Homeplus co-CEO Cho Ju-yeon. Late last year, they summoned Vice Chairman Kim and Kim in turn for questioning as suspects.

In response, MBK Partners issued a statement denying all allegations included in the warrant request and said it would faithfully explain in court that prosecutors' claims were groundless because they contradict the facts that have been revealed and are based on misunderstandings.

It added that Kim and others had cooperated sincerely with the investigation, but that seeking arrest warrants was an excessive and unfair measure, and that it distorted even efforts to save the company through rehabilitation.

A hearing at the Seoul Central District Court to review the warrants before detention is expected early next week.

[Yonhap]