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Allegations of a backroom deal in Lone Star's takeover of Korea Exchange Bank in 2003 led to the arrest of two key figures in the deal on Sunday. The Supreme Prosecutors¡¯ Office on Sunday filed for arrest warrants for the head of consulting firm Elliot Holdings, identified as Park, and a former KEB director identified as Chun, who was in charge of the bank's sale to the offshore investment firm.
When Lone Star bought a 51 percent stake in KEB for W1.3 trillion (US$1.3 billion) in October 2003, Park took W1.2 billion in consultancy fees from KEB. He then allegedly transferred half of the fee (W600 billion) to some 50-60 separate bank accounts, prompting suspicions that the money was used to grease the wheels in favor of the offshore fund. Part of the money allegedly went to Chung.
With the arrest of the two, the investigation homes in on senior people in the bank, the Finance Ministry and Financial Supervisory Commission, who will have to be summoned, prosecutors said. They hinted that could also include staff of Lone Star¡¯s legal and accounting firms at the time of the sale.
If the probe uncovers irregularities sufficient to void Lone Star¡¯s acquisition of KEB, it could also throw the fund¡¯s ongoing sale of KEB to Kookmin Bank into limbo.
Prosecutors say they will ask the Board of Audit and Inspection to help investigate suspicions that KEB¡¯s BIS capital adequacy ratio was deliberately tweaked to categorize the bank as ¡°ailing¡± at the time of the sale, thus allowing it to be taken over by an otherwise ineligible offshore investment firm.
(englishnews@chosun.com )
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