By Kim Rahn
Prosecutors are checking whether Lone Star Funds played a role in a bribery case where its former chief of Korean operations allegedly paid an activist to stop his campaign to thwart the fund’s sale of the Korea Exchange Bank (KEB).
Their focus is now on the source of the money that Jang Hwa-sik, the former head of private investor watchdog Specwatch received from former Lone Star Korea chief Yoo Hoe-won.
If the money came from the buyout fund, the prosecutors may find it plausible that Lone Star systematically engaged in an effort to buy the silence of its vocal detractor.
The prosecution said it requested a court warrant Thursday to detain Jang. He has been questioned by prosecutors since Tuesday over the bribery allegations.
“Yoo said that Jang first asked for the money saying he would submit a petition to the court for leniency,” a prosecutor said.
It is speculated that Yoo likely paid Jang from corporate funds rather than his personal account.
“Jang, who earlier claimed in his campaign that a court should imprison Yoo for life, changed his position after the bribe and submitted a petition to the court to say that Lone Star, not Yoo, should be punished.”
However, Lone Star has exited Korea, so any investigation could take time, experts say.
Jang allegedly received some 800 million won ($733,000) from Yoo in September 2011 in exchange for sparing him from his anti-Lone Star campaign.
At that time, the Dallas-based firm drew a great deal of public ire for a foreign firm’s practice of making big, quick returns and leaving. The fund was trying to sell KEB to Hana Financial Group. Lone Star acquired KEB in October 2003 and sold it to Hana in 2012, gaining 4.7 trillion won in profits and being criticized for exploiting Korean assets.
It was also right after Yoo, who quit the company, was arrested on charges of manipulating the stock price of KEB Card in 2003 to buy up the card unit on the cheap.
It was Specwatch that filed a complaint against Lone Star that started the investigation into the fund and Yoo.
Prosecutors also detained Yoo for questioning but sent him home Wednesday night. They said Yoo admitted almost all allegations about the bribery.
As Yoo was behind bars for the stock price manipulation at that time of the alleged bribery, he sent the money to Jang through his son, according to the prosecution.
Yoo was sentenced to three years in prison in 2012.
Jang was the labor union leader of KEB Card, which was merged with KEB in early 2004 after Lone Star’s takeover. He was fired because of his opposition to the takeover, according to him. He then set up Specwatch.
During questioning, Jang claimed that the money was compensation for salary he was unable to get after he was “unfairly sacked.” He said he spent the money for personal use including paying fees for his children’s overseas study and making stock investments, according to the prosecution.
Immediately after the detention was made public, Specwatch expelled Jang.
“It is unacceptable that the chief of a civic group, who should have high moral standards, took bribes,” it said in a statement.
The group claimed that no other members knew that he had accepted money in relation to the case.