South Korea's prosecutors again requested warrants to arrest three executives of U.S. private equity fund Lone Star, including its vice chairman, on stock price manipulation charges, shortly after a Seoul court rejected their demand to arrest them, prosecution officials said Friday.
The request was made hours after the Seoul Central District Court refused to allow the prosecution to arrest the executives, including the company's Vice Chairman Ellis Short, saying additional evidence is needed.
The other two are General Counsel Michael Thompson and Yoo Hoe-won, the head of Lone Star Advisors Korea, the local unit of the Texas-based company.
The court reissued an arrest warrant for Steven Lee, the former head of the Seoul office who now has no ties with the company.
They are suspected of involvement in the manipulation of stock prices of the Korea Exchange Bank's (KEB) credit card arm in November 2003 ahead of the bank's merger with the company. Lone Star became the largest shareholder of the country's fifth-largest lender earlier that year.
"We sought warrants for the three people without supplementing the previously submitted request, today (Friday)," Park Young-soo, the chief prosecutor in charge of the case, told reporters. The prosecution will appeal the court decision, he said.
Short and Thompson were asked to meet with Seoul prosecutors next Wednesday, the official added.
Lone Star Funds welcomed the court's rejection.
"We are gratified that the court did not accept the prosecutors' accusations, which we have insisted all along were without merit," fund Chairman John Grayken said in an e-mailed statement. Prosecutors have shown uneasiness at the rejection since it was feared to make it difficult for them to investigate the U.S. fund's alleged wrongdoing in acquiring KEB.
"The court appears to have agreed that the crime (by Lone Star officials) is fully proven," said Chae Dong-wook, a senior prosecutor at the Supreme Prosecutors' Office. "But we don't understand why the court rejected our request for warrants against those involved in the stock price manipulation, a serious crime that incurred damages of tens of billions of won," he said.
Chae made the remarks after a two-hour emergency meeting called by Prosecutor-General Choung Sang-myoung to discuss countermeasures following the rejection.
KEB and Lone Star have been subjects of a criminal investigation since last month on allegations that they spread false rumors of a capital write-down by the Korean lender's credit card unit in order to amass bigger stakes in the company at a below-market price. The stock price of the card company nosedived from 6,700 won to 2,550 won a share in a short period of time as a result. Lone Star is believed to have made 22.6 billion won in profits from the purchase of stocks dumped by smaller shareholders of the card company, Chae said, citing an estimation by state financial regulators.
Ten people, including Yoo and Lee Dal-yong, a former vice president of KEB, were prohibited from leaving the country in relation to the stock price-rigging allegations.
Prosecutors are also investigating whether KEB's financial value was deliberately understated to facilitate the sale of the troubled bank to Lone Star at a below-market price in 2003.
In June, state auditors said the bank's value was intentionally underestimated by its former executives, but that Lone Star did not commit any wrongdoing in its acquisition of the bank.
In a related development, investigators also sought an arrest warrant on Thursday for Lee Kang-won, the former president of KEB, for taking a leading role in the alleged underestimation of the value of the bank.
The Texas-based fund bought a controlling 50.5 percent stake in KEB for 1.4 trillion won (US$1.49 billion) in 2003, and recently signed an agreement with South Korea's top lender Kookmin Bank to resell the now 64.62 percent stake in KEB. The deal, which is expected to give it a profit of more than 4 trillion won, has been delayed as prosecutors examine allegations of wrongdoing by the U.S. fund.
Lone Star is also under a separate investigation for allegedly evading a large amount of taxes and illegally transferring foreign dollars abroad after it profited from the 2003 bank acquisition.
South Korean public opinion on the fund's takeover of the country's fifth-largest bank is largely negative. Many accuse the fund of trying to make a quick profit by purchasing a stake in the troubled bank at a fire-sale price and then selling it for large profits.
Lone Star has denied any financial irregularities.
In a statement issued after the South Korean prosecution sought warrants for Lone Star officials on Tuesday, Grayken claimed the South Korean prosecution's move was a new attack on the U.S. company based on "allegations of vague conspiracies" and no "hard evidence." Prosecutor Chae immediately rejected the claim, saying, "We are fairly and legitimately investigating the case."
Seoul, Nov. 3 (Yonhap News)
Prosecutors again request arrest warrant for Lone Star executives |
