For months, Dallas-based Lone Star Funds has insisted it did nothing wrong when it bought at a low, low price of $1.5 billion the Korean Exchange Bank, which it intended to offload to South Korea's largest financial institution, Kookmin Bank, for some $7.4 billion. And, for months, South Korean prosecutors have been saying Lone Star Funds broke all kinda laws. And it's been one hell of a business-world soap opera, full of international intrigue, disappearing execs trying to dodge arrest warrants and allegations of bribes.
In December, South Korean prosecutors insisted that Lone Star Funds "colluded with government and bank officials to make it appear that Korea Exchange Bank was insolvent so that it could be sold to Lone Star for less than its fair value." Well, today comes the investigators' final report, and it has come to the very same conclusion: "The sale price was lowered inappropriately," reports the Associated Press today. The audit board there released a statement in which it said the former head of the Korean Exchange Bank "exaggerated insolvency at KEB, making the sale to the fund inevitable and inappropriately lowering the sale price." Under South Korean regulations, an investment fund cannot take over a bank unless the bank is determined insolvent.
John Grayken, the head of Lone Star Funds, has always insisted this is nothing but a witch hunt -- "a broad conspiracy theory that never made any sense and still is not supported by any hard evidence." --Robert Wilonsky
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