The discussions took place in the days before Lehman said on Monday that it would raise $6 billion in capital, mainly from big U.S. investors, the paper reported.
It said Lehman executives ran out of time to complete negotiations on the terms, which could have seen the institutions take their stake through buying convertible preferred shares.
When contacted by Reuters, top South Korean banks -- Kookmin, Shinhan Financial Group and Woori Finance Holdings -- all flatly denied their involvement in Lehman's fund-raising.
"We have never received such an offer (from Lehman)," said Woori spokesman Lee Won-chuel. "We are not in a situation now to make such a decision," he added, indicating recent changes at its top management.
A senior strategic official of Hana Financial Group, the country's No. 4 financial services firm, said that it would be unlikely for domestic banks to invest in the U.S. bank for now.
The National Pension Service, the world's fifth-largest pension fund, also denied its investment in the Wall Street bank.
Meanwhile, Korea Investment Corp, a sovereign wealth fund, declined to comment, whereas spokesmen for KDB and government investment agency Korea Asset Management Corp were unaware of possible deals with the Wall Street bank.
Lehman officials were not immediately available for comment.
Lehman plans to raise $6 billion to bolster its capital base after losses from trading and hedging led to an expected $2.77 billion second-quarter loss.
A South Korean deal would give the Korean institutions access to Lehman's capital markets expertise while giving Lehman access to the Korean groups' balance sheets and broadening the bank's reach in Asia, the FT reported.
One source told the FT that the talks stalled on issues including the prize and size of a stake.