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Prosecutors have concluded that the entire process of selling Korea Exchange Bank in 2003 was moth-eaten with irregularities, from determining the price to approving the buyer Lone Star, it emerged Tuesday. That would mean the Financial Supervisory Commission¡¯s approval of Lone Star taking over a greater equity in KEB despite its lack of qualification would have been due to such illegalities, and opens the door for an annulment of the sale.
Prosecutors will inform the Board of Audit and Inspection and the FSC of their charge when they announce the result of their probe on Thursday. The BAI could then ask the FSC to review its approval or the FSC could withdraw approval on its own. That could also give rise to a massive legal battle between KEB¡¯s former owners, Lone Star and the financial authorities.
Lee Dae-soon, a lawyer for Spec Watch Korea, said, "The FSC can void the original sale of KEB to Lone Star under the administrative law if it is confirmed that there were mistakes, deception and lack of qualification on the part of the buyer in the process.¡± But a senior FSC official said it can only order the sale of KEB to another party within six months if the court finds concerned parties in the scandal guilty.
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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 reportedly have evidence that the former director-general of the Finance Ministry's Financial Policy Bureau, Byeon Yang-ho, and former Lone Star Korea CEO Steven Lee agreed as early as October 2002 that Lone Star would take over 51 percent of KEB for US$1 billion and even mapped out details. Byeon and former KEB president Lee Kang-won allegedly inflated the bank's non-performing debts to artificially lower its BIS capital adequacy ratio at 6.16 percent to permit the sale to the offshore investment firm.
The former vice chairman of the FSC Kim Seok-dong allegedly persuaded some FSC officials to approve Lone Star's qualification to purchase KEB at the time. Prosecutors will charge Byeon and Lee with breach of trust and ask for action against Kim by the FSC. But they will not pursue a charge against Steven Lee, who is fugitive, for bribing Byeon and others with $10.5 billion (W1 billion) via lawyer Ha Jong-sun.
(englishnews@chosun.com )
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