South Korean investigators looking into allegations the president-elect was involved in securities fraud said on Thursday they found no wrongdoing, defusing a scandal that analysts said could have undermined his authority.
CEO-turned-politician Lee Myung-bak takes office on Feb. 25 and was the country's first president-elect to face a criminal investigation.
Under local law a sitting president may not be prosecuted for such charges, but if implicated, the criminal suspicion would hang over his or her presidency. An incumbent president could face prosecution on leaving office.
"Lee Myung-bak was not involved in stock-price manipulation," Chung Ho-young, a spokesman for the special counsel, told a nationally televised news conference.
Lee's opponents have said he was deeply enmeshed in running a U.S.-based securities firm called BBK, which is under investigation in South Korea for suspected embezzlement by its managers and bilking investors out of millions of dollars.
"We have concluded the president-elect has no involvement in BBK," Chung said.
State prosecutors conducted their own probe late last year and cleared Lee. Lee's liberal opponents, who control parliament, in December pushed through a bill for the special counsel, arguing state prosecutors did not adequately do their jobs.
Conservative Lee won a landslide victory in the Dec. 19 presidential election with pledges to boost the economy.
Separately, Lee and his conservative allies worked out a compromise with liberals on a plan to streamline government and prevented a fight that had the potential of making his first days in office difficult.
The deal calls for reducing the number of ministries from the current 18 to 15.
As a part of the deal, Lee dropped his plans to shut the ministry responsible for managing affairs with North Korea due to objections from liberals who said its closure would send the wrong signals to their troublesome neighbour about its special status in the South.