Lone Star Chairman to Testify in Seoul Court

A Seoul court Wednesday asked the chairman of Lone Star Funds to testify this week for the defense of the U.S. equity firm's South Korean chief accused of stock manipulation, but whether he will appear remains to be seen.

John Grayken was asked to take the witness stand on Friday when Yoo Hoe-won, the head of Lone Star's Seoul subsidiary, stands trial over the firm's controversial purchase of Korea Exchange Bank's credit card unit in 2003, they said. Grayken has yet to confirm to the court whether he will appear.

"Chairman Grayken is known to be in a Southeast Asian city now, and we are waiting his decision", Chang Yong-kook, a Yoo representative, said at a court hearing.

Lone Star's publicity agency in Seoul earlier confirmed that Grayken will testify in court, but did not say when.

But sources said the Lone Star chairman will enter the country at 11:30 p.m. (Seoul time) aboard his plane.

"Mr. John Grayken, the Chairman of Lone Star Funds, will be giving testimony as a witness for the defense in the trial of Paul Yoo of Lone Star Korea," Insight Communications Consultants said in a press release on Monday.

If Grayken fails to appear on Friday, the court will set another date for him to take the stand, Jang Yong-jin, a court official, said.

Yoo had requested that the Seoul court call Grayken as a witness, and the court accepted the request.

Ahead of Grayken's entry, an official at the Supreme Public Prosecutor's Office said, "It's unavoidable to investigate Chairman Grayken, and we (the prosecution) discussed with his lawyer ways to let him appear in court as a witness, and then undergo a probe by the prosecution."

"Our probe is unlikely to end in a day or two, and is expected to take considerable time as there are many complicated things we have to confirm," the official said.

Prosecutors indicted Yoo this month for spreading false rumors about a capital reduction to drive down share prices of the credit card unit of the Korea Exchange Bank.

Yoo denies the charge, claiming that Lone Star headquarters had actually discussed a possible capital reduction. Grayken is expected to back Yoo's stance.

Lone Star bought a 50.5 percent stake in KEB in 2003 and later increased its holdings to 64.6 percent. Between these deals, the credit card firm merged with the bank, resulting in about 22.6

billion won ($24.4 million) in losses for its smaller shareholders.

In June last year, Lone Star sold a 13.6 percent stake in KEB, but it still holds 51.02 percent of the bank.

Attempts to sell the entire stake were scrapped by Korea's financial watchdog, which refused to approve any deal until the legal problem is cleared up.

Yoo claims that he was victimized by what he called a "targeted probe of foreign capital."