FSC chairman accused of abusing authority

The prosecution is expected to investigate Financial Services Commission Chairman Kim Seok-dong and seven other regulatory officials for their allegedly light action on Lone Star Funds.

The Minbyun, or Lawyers for a Democratic Society, in coordination with the People’s Solidarity for Participatory Democracy filed a complaint with the prosecution against the eight FSC officials on Monday, citing their allegedly “neglecting duties” and “abusing authority.”

The seven other FSC officials are vice chairman Choo Kyung-ho, standing commissioner Lee Sang-che, standing commissioner Lee Suk-joon, non-standing commissioner Shim In-sook, director general Koh Seung-beom, director Sung Dae-kyu and senior deputy director Sung Ki-chul.

The Minbyun and PSPD said the FSC has abused its authority, criticizing its “hasty” action on Lone Star for only the U.S.-based fund’s stock manipulation case without taking the fund’s questionable shareholder eligibility into consideration.

They also said the FSC neglected growing calls from the ruling and opposition lawmakers and civic groups for stern action on Lone Star.

Despite growing calls for punitive action against Lone Star from a variety of sectors, the FSC paved the way for the fund to take huge premiums from selling its stake in Korea Exchange Bank by selecting an acquirer like Hana Financial Group striving to take over the bank.

Last Friday, the FSC’s nine-member panel ordered the fund to sell most of its KEB shares to any investor within six months.

Under the reportedly powerless sanction, Lone Star is entitled to select an acquirer and enjoy management premiums totaling at least 1 trillion won ($877 billion) from its coming stake disposal ― despite an Oct. 6 ruling that Lone Star rigged the stocks of KEB’s credit card affiliate.

Many lawmakers, professors and lawyers had demanded that the regulator order Lone Star to sell KEB shares to anonymous investors on the stock market and ban the fund from selecting a particular acquirer.

Further, if the fund is found to have been a non-financial investor, Lone Star’s acquisition of KEB in 2003 could be invalidated under the nation’s banking laws.

The FSC was ordered by courts in January and September 2009 to publicize the documents which it has been examining to determine Lone Star’s eligibility for KEB control since 2007.

But it rejected the order and appealed with the Supreme Court, which is reportedly scheduled to deliver a verdict on Nov. 24.

By Kim Yon-se (kys@heraldcorp.com)