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Prosecutors on Tuesday started investigating whether the U.S. fund Lone Star bought Korea Exchange Bank at an unreasonably low price after the National Assembly¡¯s Finance and Economy Committee urged a criminal probe in the matter.
The committee says there are grounds for suspicion that Lone Star¡¯s controlling 51-percent in KEB was too cheap at W1.38 trillion (US$1.38 billion) in September 2003. It also questioned why Lone Star was allowed to buy the bank when the nation¡¯s banking law does not permit private offshore funds to take over a financial institution.
It also pointed to a discrepancy between a capital adequacy ratio outlook of 9.14 percent KEB submitted to its board of directors and one of 6.16 percent it reported to the Financial Supervisory Service. Members also raised red flags over the retirement package paid to former KEB president Lee Kang-won and other executives and the fact that one Lone Star lawyer also served as advisory lawyer for a KEB branch in the U.S.
The latest move brings the number of criminal complaints against the offshore fund¡¯s ill-starred stint with KEB to four. Last September, Spec Watch Korea reported 20 concerned parties including former finance minister Kim Jin-pyo and ex-CEO Lee on suspicions that Lone Star bought the bank too cheaply. In October, the National Tax Service reported the fund and several executives of the subsidiary that nominally handled the transaction for tax evasion, and in February the FSS did the same on charges of violating foreign currency laws.
The prosecution is considering combining the cases into one, to be handled by a special team. If Lone Star is found guilty, it could lose its rights as a majority shareholder in KEB and may have to sell any stake exceeding 10 percent within six months.
(englishnews@chosun.com )
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