Lone Star Funds Raided in South Korea

Lone Star Funds Raided in South Korea, Warrant Issued

SEOUL, South Korea (Bloomberg) March 30 — South Korean prosecutors raided the Seoul office of Lone Star Funds on allegations that the U.S. investment firm evaded taxes on the sale of buildings and breached foreign-exchange rules in international transactions.

Prosecutors also issued a warrant to detain Steven Lee, the Dallas-based firm’s former country manager, said Chae Dong Wook, a prosecutor in the Supreme Prosecutors’ Office. Lee, who has already resigned and left Korea, wasn’t available to comment. “The raid was to secure evidence for the investigation into whether Lone Star’s activities were illegal,” Chae told reporters in Seoul.

Lone Star, which has invested more than $10 billion in South Korea, last week agreed to sell a $6.6 billion stake in Korea Exchange Bank in the nation’s biggest takeover. Lone Star stands to gain more than $4 billion from its 2½ year investment in Korea Exchange.

“We are of course cooperating and look forward to a conclusion,” Ellis Short, vice chairman of Lone Star, said by telephone from London.

Prosecutors are also probing allegations of corruption among government officials at the time of the original sale of Korea Exchange Bank to Lone Star in 2003.

Calls to Lone Star’s Seoul office were not answered. The fund’s spokeswoman, Kim Ji Ho, wasn’t available for comment, as her mobile phone was turned off.

Home Raids

The prosecutors also raided the homes of the heads of Lone Star Advisers Korea and Hudson Advisers Korea, local units of Lone Star Funds, Chae said.

● Lone Star’s fund series was launched in 1996 by veteran money manager John Grayken.