[EDITORIALS]Lone Star and prosecutors

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[EDITORIALS]Lone Star and prosecutors

Lone Star Funds, a U.S. private equity group, terminated its contract to sell its controlling stake in Korea Exchange Bank to Kookmin Bank.
John Grayken, the chairman of Lone Star, said, “We have concluded that we cannot move forward with the sale of Korea Exchange Bank to Kookmin Bank,” because government investigations said have been “extended several times and now have no firm completion date.” With Lone Star opting for brinkmanship tactics, the investigation into the foreign equity fund, which has stretched out over the past nine months, entered a new and more complex phase.
Lone Star seems to be putting increased emphasis on publicizing Korea’s anti-foreign capital sentiment. The New York Times reported, “Critics have accused South Korean officials of singling out Lone Star to capitalize on nationalistic sentiments,” and the Financial Times compared the investigation by the prosecution to a “witch hunt” When Korea wants to attract more foreign funds and export more goods, those reports are more than a bit worrisome.
Even so, it is not right for Lone Star to reject the investigation results on the grounds that the country is riddled with sentiment against foreign capital. Investigations and sentiment are separate matters. The prosecution has said Lone Star is under suspicion of having broken the law. It is also true that the Seoul Central District Court, which initially turned down warrant requests for Lone Star’s executives, said it found some evidence of stock price manipulation of Korea Exchange Bank’s credit card arm. Lone Star may claim those charges are false, but they have to respect Korea’s legal system and step forward to dispel those suspicions. Trying to capitalize on public opinion to make the situation favorable to them is not fair play.
The prosecution’s emotional reaction will only make things worse. Given that the entire world is watching this case, a fair and meticulous investigation has to be conducted. The task is simple: determining whether what Lone Star did was legal or illegal. And the investigation has to be wrapped up quickly. Prolonged conflict and disturbances in the financial sector are not going to help at all.
Additionally, the Korean people should shun making hasty assumptions. Foreign capital cannot be defined as intrinsically good nor evil. What is clear is that the Korean financial market should take this situation as an opportunity to transform itself into something more transparent, thus attracting more overseas capital in the future.
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