Ex-head of S. Korean financial watchdog to testify in Lone Star suit

A former head of South Korea's financial watchdog is expected to testify before an international tribunal this week in a multibillion-dollar case the U.S. private equity firm Lone Star filed against South Korea over disputes surrounding its asset sell-offs in Korea.

Jun Kwang-woo, who served as head of the Financial Services Commission in 2008-2009, has been in Washington to testify before the International Centre for Settlement of Investment Disputes that began hearing the case Friday.

"I can't speak in detail due to my confidentiality obligation, but I will do my best with resolute determination to safeguard national interests and honor," Jun told reporters upon his arrival in Washington on Friday. "Based on facts, I will offer good explanations on the point that we treated foreign investors in a fair and legitimate manner."

Jun also said he expects the ICSID to handle the case fairly.

Sources said Jun is expected to attend a hearing Monday.

The case is the latest -- and the biggest -- of a series of legal battles involving Lone Star's investments in South Korea, including the 2003 purchase of a controlling stake in Korea Exchange Bank, and its sell-off of those assets for large margins.

Lone Star is demanding South Korea pay it nearly $4.68 billion, claiming it was forced to pay unfair taxes and suffered losses due to Seoul's delay in approving a profitable deal. It represents the first investor-state dispute filed against South Korea's government.

A total of 26 South Koreans have been named witnesses in the case, including former FSC chairman Kim Seok-dong, former Deputy Prime Minister Han Duck-soo and Kim Jung-hoe, former deputy chief of the Financial Supervisory Service.

On the first day of the 10-day hearing Friday, the two sides repeated their arguments, sources said.

The case has drawn keen attention in South Korea not only because of the amount of money involved but also its possible repercussions amid concern that if the country loses in the case, it could spark similar suits by foreign firms.

South Korea has handled the case after forming an interagency team comprising the Office for Government Policy Coordination, the finance ministry, the foreign ministry, the justice ministry, the National Tax Service and the Financial Services Commission.

A second hearing is scheduled to take place for 10 days starting June 29. (Yonhap)