FSS’s back against wall in Lone Star ruling

A Seoul court has ruled that the country’s financial regulator should make public its reports that helped Lone Star retain its status as the largest shareholder in a Korean bank, court officials said yesterday.

The Seoul Administrative Court made the ruling in a lawsuit filed by a group of employees of the Korea Exchange Bank (KEB), the fifth-largest lender in Korea, against the Financial Supervisory Service (FSS), they said.

Since 2003, the Texas-based private buyout fund has been the biggest share holder of the bank, controlling a 51 percent stake.

Based on the reports from the FSS, the Financial Services Commission (FSC) in March of last year concluded that the U.S. private equity company is a financial-oriented investor that could legally hold more than a 9 percent stake in a local financial company. Under the country’s banking laws, a non-financial player is barred from owning a local bank.

The union filed the suit after the FSS rejected its demand to reveal all of its eligibility reports on Lone Star, citing concern of a possible leak of confidential information contained in the reports and other reasons.

“Making the relevant report public does not obstruct the fairness of future work carried out by the FSS as the information is contained in eligibility reports that are already completed,” Judge Jo Il-yeong said in a ruling.

“Considering that the evaluation on Lone Star’s eligibility has long been under the spotlight, making the report public will in fact fulfill the people’s right to know,” the judge said.

If the ruling is upheld by higher courts, the FSS must reveal all relevant data, including accounting books, results on eligibility reports and documents submitted to the FSC.

The Lone Star scandal has been controversial for almost a decade since the equity firm became the major shareholder of KEB by allegedly manipulating its stock price.

Yonhap