Former regulator backs past decision on Lone Star

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Korea Times | 10 January 2018

Former regulator backs past decision on Lone Star

Jun says delayed approval of KEB sale was proper

By Park Jae-hyuk

Jun Kwang-woo, a former chairman of the Financial Services Commission, has defended his delayed approval of the Lone Star Funds’ sale of the Korea Exchange Bank in 2008, amid growing expectations that a ruling on a dispute between the government and the U.S. buyout fund will come shortly.

"As an expert in international finance, I wanted to approve of the disposal for the national interest. However, Lone Star was embroiled in two lawsuits at that time, and it was found guilty in one of them," he told The Korea Times, Wednesday.

His comment comes amid expectation that a ruling from the International Center for Settlement of Investment Disputes (ICSID) on a dispute between the government and Lone Star will be reached in the near future.

Jun was the chairman of the FSC from 2007 to 2009, when the buyout fund was trying to sell its stake in KEB to HSBC.

The FSC reviewed the eligibility of the disposal at that time.

Lone Star claimed it suffered huge losses due to the FSC’s delay.

In 2012, it filed a complaint with the ICSID, demanding the government compensate the fund for the losses and return the taxes it paid during the period the regulator postponed its decision on whether to approve the KEB sale.

Given that the ICSID is expected to rule in favor of Lone Star within a few months, the government may have to pay Lone Star hundreds of billions of won.

Some point out the government may claim part of the money from the former FSC head.

However, Jun said he would make the same decision again if he had to.

"Facing legal uncertainties, I could not have made a decision on the approval on my own, or projected the judicial authorities’ thoughts on the issue. If I had done so, it would have been an abuse of power," he said.

"It was a proper measure, considering the situation at that time."

Among those who served as commissioners at the FSC, when Lone Star was trying to exit Korea, Jun was not the only defender of the government’s decision.

FSC Chairman Choi Jong-ku also refuted criticism against the former finance authorities’ heads, who have been alleged to mistakenly allow Lone Star to file such a request with the ICSID. He was a commissioner of the FSC in 2011.

Back then, the government declared Lone Star a financial corporation that can buy a significant stake in banks such as KEB.

The fund acquired a 51 percent stake in KEB from a German bank in 2003, but critics have said Lone Star is a non-financial corporation and claimed the deal was illegal.

As the government confirmed the company’s status, it could exit Korea in 2012, after selling the stake and gaining about 4.9 trillion won ($4.6 billion) in profit.

Choi also said he would have made the same decision when Rep. Sim Sang-jung of the minor opposition Justice Party questioned him at his National Assembly confirmation hearing in July.

The lawmaker pointed out the government achieved nothing, although it has spent lots of money on lawsuits against Lone Star. The FSC head responded he would prevent the recurrence of such a case.

source: Korea Times