Was Korea Exchange Bank Sale Orchestrated?

Many who participated in Lone Star’s acquisition of the Korea Exchange Bank (KEB) in 2003 are connected with recently arrested broker Kim Jae-rok (46), according to officials.

Figures related to Kim not only in the acquisitions of KEB and Lone Star, but also in the Ministry of Finance and Economy and the Financial Supervisory Service (FSS), which handled the acquisition process, have also been found.

It is as if Kim had allocated his people in just the right places to expedite the sale of the KEB.

Lee Hun-jae, the former deputy prime minister who is very close to Kim, was an advisor of the law firm “Kim and Chang” involved in the sale. Jin Nyum, another former deputy prime minister, was related to Lone Star as an advisor of Samjong KPMG. The two former deputy prime ministers reportedly confirmed whether Lone Star was qualified as a large shareholder according to bank law.

The two are also thought to have helped Kim contact officials responsible for the KEB sale at the Finance Ministry and the FSS in many ways.

Lee Kang-won, governor of KEB at the time of its sale, attended the same middle school as Lee Hun-jae and worked with Jin Nyum for Kia Motor Company.

Kim Jin-pyo, deputy foreign minister at the time, and officials in the Finance Ministry and the FSS attended the same schools as Lee Hun-jae and Jin Nyum, and therefore are also related to Kim.

Close to Kim Jae-rok, they argued the necessity and feasibility of selling the KEB in the process of the sale.

Kim Jin-pyo said, “Lone Star is considering buying the KEB” in July 2003, when it was yet to be decided who would buy the bank.

In response to the criticism that Lone Star was providing speculative foreign capital, Lee Hun-jae also supported the U.S. investment fund by saying, “There is no problem with the integrity of Lone Star.”

Some media outlets raised suspicions that officials from Cheong Wa Dae, the Finance Ministry, the FSS and the KEB held a secret meeting in July 2003 in a hotel in Seoul and decided to sell the bank to Lone Star.

These circumstances led to suspicion that Kim Jae-rok’s connections would help Lone Star buy KEB for a low price, although those who were related to the case explain that the sale was to “attract foreign capital.”

needjung@donga.com