By Jane Han
Staff Reporter
A majority of foreign business executives here say the recent court ruling against U.S. buyout firm Lone Star Funds over the Korea Exchange Bank (KEB) deal will choke their investment venture in South Korea, a survey showed Wednesday.
Among 37 member CEOs of the European Union and American chambers of commerce polled by the Institute of Global Management, 62 percent said they feel the verdict will make it difficult for them to recommend Seoul as an ideal investment destination to their headquarters.
This is an expected response, as the controversial case has led to anticipation of such adverse consequences from potential foreign investors over Asia's third largest economy's hostility toward outside capital.
After a years-long legal battle, a Seoul court ruled in February that the U.S. private equity group and its country head, Paul Yoo, were guilty of spreading false rumors so that they could buy KEB's credit card unit at a lower price.
Lone Star, which is appealing the case, had in 2003, bought a controlling stake of KEB for about $1.5 billion, which prosecutors say was about $900 million below its true value.
The court's decision, which imposed fines totaling $26 million and jailed Yoo, also dimmed Lone Star's plan to sell its stake in KEB to bank giant HSBC, as local authorities said it would withhold approval until all legal issues are resolved.
Addressing these legal troubles engulfing Lone Star, the American Chamber of Commerce said in January that this case is ``scaring foreign investors away,'' citing that it demonstrates the country's anti-foreign capital sentiment.
Almost 70 percent of chief executives who were asked agreed, saying that external factors like unfavorable public perception will probably repel investors more so than the ruling itself.
The participating respondents are CEOs heading local divisions of global companies that reap an annual revenue anywhere from $1 million to $1 billion, and those who have resided here for more than a year.