Court, Lone Star Prosecutors at Odds

The conflict has intensified between the Supreme Court and the Prosecution regarding the court’s rejection of an arrest warrant request to detain Yoo Hoe-won, the president of Lone Star Advisors Korea, as questions arise over whether Supreme Court Chief Justice Lee Yong-hun had represented the Korea Exchange as an attorney in its lawsuit when he was a practicing lawyer before appointed Chief Justice.

The court on November 20 raised a suspicion that prosecutors leaked stories to some politicians or reporters. Prosecutors found evidence regarding his engagement while they investigated into the Lone Star buyout deal after Lee had disclosed that he took charge of the Korea Exchange Bank (KEB) case in June 2005.

Talking with reporters yesterday, Lee angrily denied the accusations that he received a large legal consultation fee, even suggesting the existence of a “force” inside the prosecution that is out to threaten him.

Public Prosecutor General Jeong Sang-myeong made an apparent attempt to dismiss the speculations in a weekly morning staff meeting on the same day, demanding prosecutors under his control abode by rules and said, “Prosecutors should show their prudence in order to dismiss public speculations that the prosecution and the court are at odds regarding the Lone Star issue.”

Park Young-soo, a chief prosecutor in Central Investigation Division at the Prosecutor-General’s office, said in an interview with Dong-A Ilbo that “We, prosecutors, do not deserve the wild speculations from the court. How can prosecutors belittle the godfather of the chief justice and stab him in the back?”

The Central Investigation Division at the Prosecutor-General’s office said on the same day that it had indicted without detention the Belgium-based LSF-KEB Holdings SCA, a “paper company” set up by Lone Star to manage its takeover of KEB, and the KEB as well on charges of manipulating stock prices of the KEB Credit Service Co., the bank’s credit card unit, (a violation of the Securities and Exchange Act).

Also, the two companies worked together to spread rumors of a possible capital reduction of KEB Credit Service Co. to take over the KEB at a lower price, driving down its stock price to 2,550 won from some 6,000 won level per share in the KEB board meeting in Nov. 20, 2003, the prosecution said.

The prosecution accused the KEB of gaining 22. 6 billion won in unjust profit, which it had to pay its individual minor shareholders, and the LSF-KEB holdings SCA of gaining 0.39 percent of the KEB shares (which amounts to approximately 17. 7 billion won).

Chae Dong-uk, a criminal investigator in the central prosecution, stated in a briefing on the same day, “We have indicted these two firms first because the statute of limitations will expire on November 20,” adding, “The Financial Supervisory Commission will take a further step to question the major stockholder position of Lone Star on KEB once the two firms are found to be guilty.”

jefflee@donga.com needjung@donga.com