Report shows U.S. fund asked for help in avoiding taxes
U.S. equity fund Lone Star, accused of tax evasion in its 2003 purchase of Korea Exchange Bank (KEB) but cleared by the Board of Audit and Inspection last week, in fact lobbied the U.S. government to resolve the tax dispute with the Korean government. According to a report obtained by the Hankyoreh and confirmed by a U.S. government agency, between June last year and February of this year the Dallas-based fund lobbied the Upper and Lower Houses of Congress, the Department of Commerce, and other trade-related government departments to lobby for favors regarding its tax debate with South Korea. The report also showed that Lone Star asked the U.S. government to include measures in its free trade agreement with Korea to help protect earnings from the Texas fund’s purchase and planned sale of KEB."If a trade protection measure is included in the free trade talks and Lone Star delays its sale of KEB until the Seoul government’s move to introduce toughened taxation rules, it would be possible for the equity fund to evade paying taxes," said a trade lawyer familiar with the case. Seoul and Washington completed their first round of free trade talks three weeks ago, and plan to launch the second round here next month. The revelations come as South Korean prosecutors and auditors have taken over the investigation from the Board of Audit and Inspection, looking into allegations that KEB, the nation’s fifth-largest lender, was fraudulently undervalued before its sale to Lone Star. The prosecution is also looking into the tax evasion claims. In response to the Lone Star incident, the Korean government is reportedly preparing to introduce toughened regulations to ensure taxation of large profits made by equity funds.
