Lone Star’s chief of Korean operations, Paul Yoo, was found guilty and sentenced to five years in prison. He was taken directly to prison from the courtroom. Ruling for the court, Lee Kyung Choon stated:
. . . Their activity constituted a grave fraud activity and severely damaged the interest of minority shareholders of KEB Credit Service
Fines of 25 billion won were levied as well. John Grayken was quoted as saying “Lone Star maintains that there is simply no credible evidence to support the court’s findings. Lone Star will appeal this decision and is confident that it will be reversed.”
Naturally, then there are completely opposite messages in headlines such as “El-don’s” (LMB’s man from planet Krypton) declaration that “insiders must end outside barriers”.
What next then?
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Would it help if he put on hospital pajamas, sat in a wheelchair and cried?
Or does that only work for chaebol heads…
This will be appealed up to the Supreme Court. In the meantime, no good deed goes unpunished in Korea.
Last time I heard about Yoo, he had fled to the US and Korea was seeking to get him extradited back to Korea. The KEB Card stock manipulation case seemed to be fairly strong from the start, unlike the much more serious, but largely unproven allegations that Lone Star bribed officials to purchase KEB at below market rates. Lone Star did pay above the publicly traded share value of KEB stock, after all, and the prosecutor has thus far failed to show credible evidence of bribes from Lone Star to the government. Lone Star was provided with an exception to the Bank Law, allowing them to qualify for the takeover as a non bank financial institution, but KEB was a pretty poor performer and close enough to bankruptcy to make it a judgement call. So, the Lone Star KEB takeover ruling may be quite different fromt he Yoo case.
#3. Do you mean Steve Lee and not Paul Yoo? Steve Lee was the ex-Lone Star head that fled to the USA. I thought Yoo was here all the time.
You’re right, thanks - I did mean Lee, not Yoo. And Lee was on the run, probably for good reason. So, I suppose this ruling could be harmful for the reputation of Lone Star’s management. Anyone know what happened to Lee?
Contrary to speculation by Spec Watch Korea that Lone Star had hoped on a guilty verdict, I understand that the Texas company’s legal team had been fully confident of an acquittal given the presented evidence.
This is not to say that with all the smoke there was no fire, but more likely the flames came from former KEB Korean executive(s) — and not from Lone Star.
But it doesn’t matter. The Korean public wanted — and finally got a guilty verdict. Whether the ruling holds up upon appeal under the incoming national administration, however, may be another matter.
But once again, the real losers are, of course, the Koreans. While many Koreans who have not bothered to look into this case are pretty satisfied with yesterday’s ruling, who is to say how many Korean investment decisions off shore were or will be postponed or canceled as a result of yesterday?
It should be noted that it was the Korean Government?s forced inclusion of the red ink hemorrhaging credit card unit into the sale of KEB that substantially created the devaluation of assets.
Lone Star and other buyers wanted just the bank itself. But the regulators forced a two units or nothing choice. Ironically, today the Government is prosecuting the buyer for stock manipulation via alleged underrating of the credit card unit’s performance.
The irrational glee held by many Koreans, created by yesterday’s ruling, may be attributed to what has been overly described as being xenophobic.
Sometimes, however, I wonder if there is actually a national subconscious masochism — or possibly a weird, self-directed schadenfreude that finds a perverse joy from these self-inflicted wounds. The pleasure comes from being inscrutable and thereby “misunderstood” by the rest of the world which is “naturally” manifested in Korea’s unique struggle to move forward in spite of its self-imposed peculiarities.
North Korea’s juche, for example, is an essentially impractical, go-it-alone economic scheme that leads to self destruction, but even South Koreans can derive some emotional satisfaction from the notion.
Should that indeed be the case, Korea has a much longer way to go than many here realize to achieve its goal of being a truly competitive economy in the 21st century.
Great comment, Tom. I never knew about the forced bundling of the card biz in the original deal. Interesting, ironic…
I’ve been carrying in the back of my mind for some time the quiet belief that juche philosophy is alive and well in South Korea. The back of my mind is enjoying the validation of finding that someone else has made the same observation.