In blow to Lee, South Korea cabinet nominees quit

SEOUL (Reuters) - Just three days in office, South Korean President Lee Myung-bak suffered his first major political setback on Wednesday when two of his nominees for the cabinet withdrew after accusations of past unethical conduct.

The former CEO, who won December's election by a landslide, took office on Monday with promises of radical changes of policy to lift up the economy and rebuild ties with allies the United States and Japan.

But he has so far been unable to form a cabinet or put his choice for prime minister in office because of fierce opposition from his liberal opponents who dominate parliament.

His nominees for the unification and environment ministers withdrew their names after allegations they had evaded taxes or speculated in real estate -- a politically charged issue in South Korea.

"The two people have made a difficult decision for the sake of starting a new government," presidential spokesman Lee Dong-kwan said.

On Tuesday, MPs refused to vote on Lee's nominee for prime minister Han Seung-soo, a veteran bureaucrat and former finance minister who had been initially expected to win easily approval.

Many opposition lawmakers said Han's past real estate dealings and his role in past governments under authoritarian rulers made him unfit for the job.

"The blow to Lee is pretty big because it's so early in his term," said political commentator Yu Chang-seon.

Lee himself faced two separate investigations into suggestions of securities fraud before he took office. He was cleared both times.

But his problems with parliament could be short-lived. April's general election is widely expected to give his conservative party a majority in the assembly.

(Reporting by Jack Kim, editing by Jonathan Thatcher)