By Kim Jae-won
There is something strange in behavior of the Financial Supervisory Service (FSS) in response to the three boardroom directors of the Korea Exchange Bank (KEB) who were allegedly involved in stock price manipulation.
The financial watchdog conducted a two-day on-site probe of KEB last month. Investigators were dispatched to examine whether KEB’s three directors — Michael Thompson, Ellis Short and Paul Yoo — were involved in stock price manipulation of KEB’s credit card unit back in 2003.
The FSS plans to send the case to the disciplinary committee on Thursday, which may suggest dismissal, the ultimate punishment for an executive at a financial firm.
The first question is why now? The financial watchdog has ignored numerous requests from the KEB labor union to fire them since their legal disputes have not been settled.
Suddenly the FSS is moving quickly to crack down on the directors though they are technically still presumed to be innocent. Yoo, former head of Lone Star Funds’ Seoul unit, filed a complaint to the Supreme Court protesting a lower court’s ruling to impose a three-year jail term on him. Thompson and Short were even not charged as they were not even in the country.
The second question is why is the FSS trying to exert its power so aggressively at a moment when the three directors will mostly likely be fired anyway at the annual shareholders’ meeting scheduled for March.
“Lone Star’s voting right has been limited to 10 percent at this time, which means the three directors appointed by the company may lose their seats in the meeting,” said a source familiar with the matter on condition of anonymity.
The source said that he could not understand why the FSS conducted the “needless” investigation.
Some industry watchers say there is a chance that the FSS wanted to favor Hana Financial Group, pressuring Lone Star to complete their deal as soon as possible.
In response to the FSS’s tough investigation on KEB, Lone Star agreed to sell its 51 percent stake in KEB to Hana for 3.9 trillion won ($3.5 billion) earlier this month, lowering its initial offer by 11 percent.
Hana Chairman Kim Seung-yu is a classmate of President Lee Myung-bak, and the KEB union argued that the authorities have treated the company favorably due to the special personal relationship.
Some suspect that the FSS is cracking down on Lone Star to cover up the Financial Services Commission (FSC)’s decision to take no punitive measures on the Texan company. The FSS is an executive body of the FSC.
The financial authorities have faced major criticism from the public and unionists for paving the way so Lone Star can exit Korea smoothly.
In any case, the FSS may not escape the backlash for neglecting its duties to examine KEB back in the early 2000s and thereafter, as well as for trying to abuse power in order to hide any wrongdoings.