$4 Billion. That's a Lot of Kim Chee.

Lone Star Funds Chairman John Grayken asks the question, "Why is everybody always pickin' on me?" Or something like that.

Since late March, we've been following the troubles of Dallas-based Lone Star Funds, which has been in hot water with the South Korean government over the sale of Korea Exchange Bank, which Lone Star bought in 2003 and now wants to offload to South Korea's largest financial institution, Kookmin Bank, for some $7.4 billion. Lone Star Funds stands to make $4 billion off the deal. Not bad. Well, not really.

To recap: The South Korean government has accused Lone Star Funds of tax evasion and embezzlement, among other allegations, and gone on a manhunt for at least one Lone Star Funds exec, while Lone Star's tried to pay off the government there with a $106-million "charitable donation," while at the same time threatening to kill the deal by September 16 if the South Koreans didn't finish up their investigation and back the eff up, yo. Which I believe is how The Wall Street Journal would have put it.

Anyway, there comes news early this morning that Lone Star may be in more trouble with the South Korean government. It's after the jump.

South Korea's Financial Supervisory Commission, often referred to in the South Korean press as the "watchdog" arm of the government's Securities and Futures Commission, announced today it's turning over to government prosecutors "the results of a probe into KEB's acquisition of its credit card unit," according to a story from the Associated Press. According to The Korea Times this morning, Lone Star Funds "has been suspected of having played a role in fixing share prices of KEB's card unit KEB Credit Service in November, 2003, according to sources. But regulators have failed to come up with evidence proving Lone Star's involvement in the alleged stock price manipulation."

Quite simply, reports The Korea Herald:

"KEB was suspected of intentionally spreading rumors of a capital write-down by KEB Credit to purchase the unit's shares at a cheaper price.

Hit by rumors of a possible capital reduction, shares of KEB Credit plunged to 2,550 won ($2.70) from 7,330 won in a space of just two weeks. KEB, which was taken over by Lone Star, then bought the shares at 5,030 won each from the second-largest shareholder Olympus Capital and at 4,004 won each from minority shareholders. The integration of the credit card business was completed in early 2004.

There were allegations that Lone Star took part in the scheme."

Lone Star Chairman John Grayken keeps maintaining his company's done nothing wrong. Sunday he issued a statement in which he griped about "the burden of endless accusations." Which did nothing to stop 'em from coming, alas. Still, Hwang Ju-myung, the attorney repping Lone Star, insists prosecutors will finish their investigation by the end of next month. He also told the AP the sale will go through, even if it kills 'em all. "Everybody is tired," Hwang told the wire service. "Lone Star is tired. The prosecutors are tired." Meanwhile, Fortune's reporting that the investigation into Lone Star's doings in South Korea are making foreign investors "skittish" about sinking fortunes into that country, which is probably fine with South Koreans, who felt like outsiders were swooping in and bugging out with fistfuls of their kim chee. --Robert Wilonsky

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Robert Wilonsky
Contact: Robert Wilonsky