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The Supreme Prosecutor’s Office is seeking arrest warrants for the vice chairman of Lone Star, Ellis Short, and three other current and former executives on charges of share price manipulation in the offshore fund’s takeover of Korea Exchange Bank. They are also looking to arrest Yoo Hoe-won, head of Lone Star Advisors Korea which oversees Lone Star's Korean investments, on charges of collusion. If they are found guilty, Lone Star would automatically lose its position as the major KEB shareholder and forced to dispose of its stock. There are calls for Lone Star's purchase of KEB to be voided since it took over the bank at below market price. It would be the first criminal conviction of an overseas investment firm, an event pundits fear could pour cold water on global investment in the Korean financial market.
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The lobby of the Star Tower building housing Lone Star’s Korean subsidiaries in Seoul’s Yeoksamdong
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Prosecutors filed for arrest warrants for Short, Lone Star's legal advisor Michael Thompson, and the fugitive former head of Lone Star Korea Steven Lee. Yoo, Thompson and Lee were outside directors in KEB. Lone Star Funds chairman John Grayken was also an outside director, but he was not present at a board meeting that allegedly discussed the scam. A decision on the arrest is expected Thursday. All except Yoo have U.S. citizenship and failed to answer a summons from prosecutors, who say they will seek their extradition.
Senior Prosecutor Chae Dong-wook said the four are suspected of violating the securities trading act by colluding to lower KEB's stock price by spreading false rumors of a capital write-down before the takeover. Because of the rumor, the share price fell dramatically from W6,000 per share to W2,550. KEB and Lone Star have been under investigation by the Financial Supervisory Service at the prosecution’s request since April. The FSS reported its findings to the prosecution on Oct. 28, and prosecutors slapped 10 key figures with an overseas travel ban.
(englishnews@chosun.com )
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