SEOUL, KOREA - SPECIAL prosecutors on Thursday cleared South Korea's president-elect Lee Myung Bak of fraud allegations, in an inquiry report released four days before he takes office.

'We found the president-elect was not involved in stock manipulation,' chief prosecutor Chung Ho Young said on live television.

He was announcing the outcome of a 40-day probe into whether Mr Lee was linked to a 2001 stock manipulation scandal which caused heavy losses to investors.

'We verified that Kim Gyeong-Jun was independently involved in stock manipulation using a paper company,' Mr Chung said. -- AFP

The chief prosecutor also cleared Mr Lee of allegations that he had lied about his wealth and alleged ownership of real estate in an upmarket district of Seoul.

'Allegations that the president-elect owned the land by using borrowed names are groundless,' Mr Chung said.

'The president-elect is not the owner of the land.'

Mr Lee, who will be South Korea's first leader from a business background, had been dogged by allegations of involvement in the stocks scandal linked to an investment firm called BBK.

State prosecutors in early December had cleared him.

But parliamentary opponents of Mr Lee, citing what they said was new video evidence, voted two days before the Dec 19 presidential election to set up the independent probe.

The conservative politician won a landslide victory despite the allegations.

Thursday's findings will smooth Mr Lee's path as he prepares to launch a business-friendly administration pledged to revitalise the economy.

Some 45,000 guests have been invited to Monday's inauguration, including US Secretary of State Condoleezza Rice and Japanese Prime Minister Yasuo Fukuda.

Mr Lee's former business partner Kim Gyeong Jun, who was extradited from the United States, is on trial for stock manipulation, embezzlement of 38 billion won (S$59 million) and forgery. -- AFP