Yesterday, South Korean prosecutors raided this building, the Korean Exchange Bank, for a second time--which apparently means all's going well in Lone Star Fund's sale of the joint.

Lone Star, Two Raids

Go here for a brief history of how Lone Star Funds got into trouble with the South Korean government in March. The short version: The Harwood Street-based investment firm, which is the largest foreign investor in South Korea, is trying to sell the Korean Exchange Bank, which it has owned for about three years, to Kookmin Bank for $7.2 billion. But South Korean officials say something ain't kosher about the sale, which will net Lone Star about $4 billion; has to do with the fact Lone Star won't pay tax on the proceeds, the result of some kind of a tax shelter that South Korean prosecutors and other tax agencies say is very illegal. Thus far, there's been a manhunt for at least one Lone Star exec, a press conference with the company's founder (Robert Bass protege John Grayken), a lawsuit filed by Lone Star Funds against one of its own and, most recently, legal posturing from Lone Star, which said only last week that if prosecutors don't back off by September 16, well, they just ain't gonna sell the bank--which, last I looked, was kind what the South Korean prosecutors were after at this point.

That sort of brings you up to speed; there are other allegations of tax evasion and embezzlement and payment offers from Lone Star to South Korea that some have dismissed as bribes, but you're good. So. Yesterday, South Korean prosecutors raided Korean Exchange Bank for a second time. (Which doesn't necessarily mean anything; just ask anyone working at City Hall, where they're still trying to figure out if the FBI just lost their number.) Says the Associated Press this morning that Choi Dong-wook, the prosecutor in charge of the case, said Wednesday's raid "concerned a slush fund he said involved KEB and that prosecutors also raided an information technology company. He did not elaborate about how that was related the Lone Star probe." And, a South Korean news agency "earlier reported that the raid was focused on information technology equipment purchases by KEB, quoting Choi."

Henh. Only last week, South Korean Finance and Economy Minister Kwon O-kyu held a press conference in Seoul during which he insisted, "The concerned parties are discussing the sale of KEB to Kookmin as planned." And he said, hey, this whole thing with Lone Star Funds shouldn't scare off foreign investors. No, no way. How could it? --Robert Wilonsky

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