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Prosecutors on Sunday insisted they have evidence that Lone Star executives in 2003 deliberately aggravated the liquidity crisis of Korea Exchange Bank Credit Card Services and manipulated its stock price by spreading false rumors of a capital write-down. In a rare detailing of available evidence in an ongoing investigation, prosecutors said they secured audio files to prove the charges. Prosecutors earlier in a show of defiance resubmitted applications for arrest warrants for former and current Lone Star executives after a court turned them down. Senior Prosecutor Chae Dong-wook said his office is asking the court to reconsider by Tuesday ¡°so prosecutors can conduct their investigations properly.¡±
In a press release titled ¡°Stock Manipulation of Korea Exchange Bank Credit Card Services,¡± the prosecution alleges that the offshore fund¡¯s vice chairman Ellis Short, the former head of Lone Star Korea Steven Lee, Lone Star's legal advisor Michael Thompson and head of Lone Star Advisor Korea Yoo Hoe-won in October and November 2003 manipulated the credit card company's stock price by halting liquidity support for the ailing unit and spreading false rumors of a capital reduction plan. They said they have tapes from a KEB board meeting recording the entire process. With the manipulation, Lone Star saved W22.6 billion (US $1=W937) in taking over KEB and maintained over 50 percent of the KEB's total equity, thereby raking in a huge profit in reselling the bank afterwards, Chae said.
Prosecutors said a ¡°third party¡± participated in the press release for the bogus capital reduction plan. According to then-KEB staffers, the Lone Star executives in a KEB board meeting decided to have a press release on the capital reduction plan reviewed by Kim Hyung-min of Kim & Chang, the law firm that gave legal advice to Lone Star at the time of the sale. He allegedly revised the initial draft written by KEB to emphasize the capital reduction plan. Prosecutors recently questioned Kim on the matter.
The Seoul District Court earlier last week turned down the arrest warrants, prompting prosecutors in an emergency meeting chaired by the prosecutor general to decide on their revolt. The court on Sunday dismissed their move, saying prosecutors were basing their charges on appearances rather than fact.
(englishnews@chosun.com )
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