South Korea's state auditors concluded on Monday that buyout fund Lone Star took over the Korea Exchange Bank (KEB) "at a below-market price" in 2003, although the U.S.-based equity fund was not qualified for the deal.
Then KEB executives exaggerated the ailing bank's poor financial situation to enforce its sale with tacit approval from government financial regulators, the Board of Audit and Inspection (BAI) said, announcing the result of its three-month probe into the controversial takeover.
State auditors said they found KEB's Bank for International Settlements (BIS) capital adequacy ratio stood well over 8 percent as of the end of 2003, far higher than the 6.16 percent estimated by KEB at the time.
BIS capital adequacy ratio is a critical measurement in determining the financial position of banks. Banks are regarded as healthy when the ratio is above 8 percent.
"We see KEB was not about to go bankrupt instantly at that time, thus the bank's explanation that its sale was inevitable to resolve the problem of its credit card business arm is not persuasive," Ha Bok-dong, the first deputy secretary-general of BIS, told reporters. "The bank sale was conducted improperly in an unfair and opaque manner," he added. The Texas-based fund bought a controlling 50.5 percent stake in KEB for 1.4 trillion won in 2003, and recently signed an agreement with top lender Kookmin Bank to resell it for 6.4 trillion won.
The deal has been delayed as prosecutors examine whether KEB's financial strength was deliberately understated to allow the quick sale of the bank.
Lone Star is also under a separate investigation for allegedly evading 14.7 billion won in taxes and illegally transferring $8.6
million overseas after the fund profited from the 2003 buyout.Seoul, June 19 (Yonhap News)
Lone Star's takeover of KEB 'inappropriate,' state auditors say |
