By Park Si-soo
Staff Reporter
John Grayken, chairman of Lone Star Funds, Friday denied allegations that the company's Seoul representative had manipulated stock prices in 2003 to take over Korea Exchange Bank's (KEB) card business for a price below its fair market value.
The U.S. private equity fund head took the stand as a defense witness for Yoo Hoe-won, who is charged with stock manipulation through spreading false rumors of a capital reduction to lower the cost of the credit card unit. Yoo was indicted in January 2007.
``I think it's completely untrue,'' Grayken replied to the judge's presentation of allegations filed by the prosecution. The company did not make any attempt to violate Korean law in buying the controlling stake of the credit card firm, he added.
Yoo has denied the charge of stock manipulation, claiming that Lone Star headquarters had discussed the possible capital reduction. Grayken also supported this contention, saying ``That was what KEB was going to do. My understanding was the merger would go through with a capital reduction.''
Grayken arrived in Seoul late Wednesday to testify at the Seoul Central District Court in the case involving Yoo, the head of company's Seoul operations, who had requested his lawyers and the court to call Grayken as a defense witness.
In related news, the Justice Ministry banned Grayken from leaving the country for 10 days Thursday at the request of the prosecution. Prosecutors want to question him over allegations that the government undervalued the KEB when it sold it to the U.S. investment fund back in 2003.
``He should follow South Korean law since he is here,'' said Kim Kang-uk, a prosecutor at the Supreme Prosecutors' Office.
The trial is part of the prosecution's ongoing high-profile investigation into Lone Star's controversial purchase of the KEB, which is at the center of an ongoing investigation.
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 was merged with the bank, resulting in about 22.6 billion won ($24.4 million) in losses for minor shareholders.
In June last year, Lone Star sold a 13.6 percent stake in KEB, but it still holds 51.02 percent of shares in the bank.
Lone Star has cancelled its attempts to sell the entire stake, as the Financial Supervisory Commission refused to approve a deal until all legal problems are cleared up. In its latest move in September, Lone Star signed a $6.3 billion contract with London-based HSBC Holdings to sell its stake by April.