US buyout firm Lone Star has suffered a further setback in its bid to dispose of its stake in Korea Exchange Bank, after Korean tax officials raided its office and confiscated documents relating to its recent deals.
“The National Tax Service raided Lone Star Korea offices on Wednesday, apparently in relation to Lone Star Funds’ recent sales activities,” Lone Star chairman John Grayken said in a statement today.
The office was raided by 27 Korean officials, who took away 11 boxes of data and documents relating to recent deals, according to Lone Star.
The US buyout firm has completed two deals in the country in recent months – the sale of an initial 13.6 percent stake in KEB and the disposal of Kukdong Engineering and Construction.
The raid is the latest instalment in a long-running dispute between Lone Star and the Korean government, whose Board of Audit and Inspection ruled in March that the supervisory board’s approval of the original 2003 deal was illegal and improper.
Lone Star, which responded with a statement denying that it had conspired with officials to artificially undervalue the bank, was forced to cancel a lucrative $7.3 billion sale of KEB to Kookmin Bank at the end of last year as a result of ongoing investigations by the government.
Grayken said today: “While we are disappointed by yet another unannounced raid of our offices, we are committed to cooperating fully with their investigation.”
There had appeared to be light at the end of the tunnel for Lone Star earlier this week, after it revealed that it was in talks with HSBC about the sale of its 51.02 percent stake in the bank. However, the raid suggests the sale is unlikely to be the end of the firm’s problems in the country.
Earlier this year Grayken told Reuters that Lone Star was not liable for tax on its investments in Korea due to a tax treaty the country has signed with Belgium, where Lone Star bases its global operations.