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The prosecution on Sunday revealed audio files of a Korea Exchange Bank board meeting of Nov. 20, 2003 to prove charges that executives of Lone Star, KEB's major stockholder, manipulated the stock price of the bank's credit card unit. In the meeting, Lone Star executives called for a press release to highlight plans to reduce the capital of the credit company, even hurling abuse at Korean directors who opposed the scam. Just a day before the board meeting, prosecutors say, the KEB outside directors from Lone Star met secretly to conspire to spread rumors of a bogus capital write-down. They also deliberately aggravated the liquidity crisis of KEB Credit Card Services by halting liquidity support for the ailing unit. As a result, the stock price plummeted from W7,330 on Nov. 10, 2003 by nearly two-thirds to the W2,500 range in a fortnight, at which point Lone Star bought it up.
It is unusual, to say the least, for prosecutors to make key evidence in an ongoing investigation public. It was an act of defiance against a court decision not to grant arrest warrants for the three Lone Star executives, who included the firmĄ¯s vice chairman Ellis Short. Now, the audio files look like powerful evidence of Lone Star's illegality. The court, though it refused the arrest warrants, acknowledged that there is reasonable suspicion of Lone Star's stock price manipulation but felt the case did not warrant arrest. The Financial Supervisory Service in September had already concluded that Lone Star inflicted a loss of at least W22 billion (US$1=W942) to minor shareholders through stock price manipulation before the prosecutors got busy.
Prosecutors must not conduct their investigation in a manner that incites national resentment of all foreign capital, but of course in any clear illegality by individual foreign firms they must apply the law. Lone Star, by the same token, has no call to go bawling overseas about how Korean prosecutors persecute the innocent. Lone Star executives have consistently been obstructive by demanding safe passage home if they are to appear for questioning. That is no way for adults to behave. They should come here with dignity, clear up any misunderstandings if they can and take the consequences on the chin if they canĄ¯t -- especially if Lone Star doesnĄ¯t want to be hounded out of this country forever.
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