South Koreans Shine Light On Lone Star

First, Lone Star Funds was barred from using overseas companies. Now, the Korea Herald reports, prosecutors are planning a full-blown investigation into whether the Texas-based private equity firm was involved in some funny business involving its take over three years ago of Korea Exchange Bank

First, Lone Star Funds was barred from using overseas companies, after South Korea’s Financial Supervisory Services charged two Lone Star units, Hudson Advisers Korea and Lone Star Advisers Korea, with paying US$8.6 million for what the FSS says were bogus services as a way of transferring money outside the country. Now, the Korea Herald reports, prosecutors are planning a full-blown investigation into whether the Texas-based private equity firm was involved in some funny business involving its take over three year ago of Korea Exchange Bank. The finance-economy committee of the government’s National Assembly has charged Lone Star with bribing top government officials and offering top KEB executives large severance packages in exchange for supporting the firm’s takeover bid. The Herald – which also says the investigation will look into whether Lone Star evaded paying some 14.7 billion won (US$15.2 million) in taxes – reports that critics have said the only way the firm was able to qualify as a buyer was by manipulating its Bank for International Settlements, or capital-adequacy, ratio.