[Editorial] Is Lone Star hiding under “anti-foreign” bias claims?

Korea Exchange Bank's (KEB) major shareholder, Lone Star, has suddenly canceled its agreement to sell KEB to Kookmin Bank. Lone Star's stated reason is that it is unsure of when the prosecution is going to conclude its investigation into alleged wrongdoing in its purchase of KEB, as the investigation has been extended several times over. As the major shareholder of KEB, it has the right to cancel the contract. One has no place challenging a decision based on business reasoning and commercial judgment. On the other hand, it is hard to understand Lone Star's attitude when it places the entire responsibility for annulling its agreement on an external factor: the prosecution's investigation.

Current talk about anti-foreign business sentiment in South Korea, something of vague substance, makes even less sense. Lone Star is suspected of manipulating KEB shares. It is also suspected of illegal lobbying in the course of its acquisition of KEB. If the allegations are true, they are crimes demanding serious penalty, and Lone Star might lose its qualifications as majority shareholder. Common sense says that if you feel wrongly accused, you should be proactive about explaining yourself as an investigation takes its course. Instead, Lone Star has repeatedly refused to appear before investigators, saying without basis that the investigation is some sort of conspiracy, and it has consistently acted with arrogance by trying to disregard domestic Korean law by asking for a guarantee that the suspects be able to leave South Korea as they please without facing detention.

Prior to signing its agreement with Kookmin Bank, Lone Star pledged to actively cooperate with authorities on inquiry and taxation matters. Concerned about a public that was worried about the nation's wealth leaving the country, it announced it would give to social causes. Once the main agreement was signed, however, it had a 180-degree change of attitude. It insisted that it had nothing more in taxes to pay and tried to have the United States government halt an audit by Korea's Board of Audit and Inspection. It revealed its true nature as a speculative capital fund that will stop at nothing to walk away with its own profit.

There is nothing wrong with profit from legitimate investment. We have no intention of morally measuring the essential nature of funds that exist to maximize profit. But it is a whole different matter when an investor disregards domestic law and the rules of the market to obtain wrongful profit through illegal behavior. The global standard for dealing with those who disrupt financial markets is to mete out strong punishment without regard to nationality. Numerous foreign investment giants do business in Korea, but almost none among them has behaved in a way that found it accused of things like tax evasion and stock manipulation.

Lone Star calls the prosecution's investigation a public opinion offensive riding high on Korean nationalism, and says it is the victim of anti foreign capital feelings in Korea. Lone Star has issued other threats, such as that foreign capital is going to take its money elsewhere. Lone Star executives are not going to succeed at hiding their illegal and speculative behavior behind such political slogans. They need to see that it is their speculative behavior that is giving foreign capital a bad name.

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