Lone Star hearing to begin

By Kim Jae-won

The Seoul High Court is set to begin deliberations on the case involving Lone Star Funds and the former head of the company’s Korean unit, who allegedly was involved in stock manipulation of Korea Exchange Bank (KEB)’s credit card arm in 2003.

Deliberations will begin June 16 on the Texan buyout fund and Lone Star Advisors Korea’s former president Paul Yoo are scheduled after the Supreme Court overturned the lower court’s not-guilty verdict in March.

The court will examine whether the company and Yoo spread false rumors that KEB Credit Service plans to reduce its capital in order to buy the company’s shares at a cheaper price. The Texan buyout fund acquired the credit card firm later in 2004.

The ruling will likely affect the U.S. private equity company’s eligibility as majority shareholder in KEB and thus garners much interest from market watchers. By Banking Law, a financial company is deprived of the privileged status, if it is convicted of a business-related crime in the past five years.

In November Hana Financial Group signed to buy KEB’s 51 percent controlling stake from Lone Star. Hana Financial is waiting for regulatory approval of the deal because the Financial Services Commission said it will not examine the case until Lone Star’s position as a majority shareholder of KEB is legally determined.

Legal experts say that the high court will respect the Supreme Court’s ruling this time.

“A high court is supposed to follow the Supreme Court’s decision. The Seoul High Court will maintain the upper court’s guideline at the trial,” said an attorney from Haewoo, a Seoul law firm.