SEOUL: Korea Exchange Bank (KEB) paid some 43 billion won ($39.2 million) to Lone Star Funds recently following a ruling by the High Court of Singapore that the lender manipulated the stock price of its credit card unit in 2003, an opposition party lawmaker said Friday.
Rep. Kim Gi-juhn of the New Politics Alliance for Democracy (NPAD) said the court ruled that KEB spread a false rumor about a capital reduction by Korea Exchange Bank Credit Services (KEBCS) in order to merge with it at a lower price, reported The Korea Times.
“The Financial Supervisory Service confirmed KEB and Lone Star agreed to the resolution, though it declined to unveil when it was accomplished,” said Kim Su-jeong, an aide to Kim.
KEB declined to comment on the matter.
The suit came after Lone Star paid 73.1 billion won to Olympus Capital, a former shareholder of KEBCS, which filed a suit against Lone Star with the Singapore International Arbitration Centre in 2008.
The ruling from the Singapore court is at odds with that of Korea’s Supreme Court which ruled that Lone Star spread the rumor, not KEB. Paul Yoo, head of Lone Star’s Korean unit, was sentenced to three years in prison and fined 4.9 billion won in 2011 while KEB was cleared of the accusation.
The ruling comes a year after Lone Star won a 300 billion won-lawsuit against the National Tax Service at the Seoul Administrative Court. The tax agency imposed higher rate transfer income tax on the company with the KEB sale, but the court ruled that it should apply the low rate capital tax.
Lone Star also filed a lawsuit against the Korea government with the International Centre for Settlement of Investment Disputes for 4.6 trillion won in compensation, saying it lost that much money when the administration suspended approval of its sale of KEB to HSBC in 2008. The case is still pending, and experts say it may take a couple of years to be resolved.
Meanwhile, Financial Services Commission (FSC) Chairman Shin Je-yoon said the authorities will decide on the merger of KEB with Hana Financial Group in February.
Shin said the FSC will deal with the case in its biweekly meeting scheduled for Feb. 11 as Hana, KEB’s major shareholder, filed the necessary paperwork with it earlier this month.
“I think we will make a decision next month,” said Shin in a meeting with reporters.
The KEB union has opposed the merger, saying it is a violation of an agreement that the group will merge with the bank five years after the initial purchase. Hana bought a major stake in KEB from Lone Star three years ago.
