Report: Lone Star exec admits theft

Steven Lee, the former head of Lone Star’s embattled South Korean operations, has reportedly admitted embezzling millions from the firm, funds which he has subsequently repaid.

Lone Star Funds, the global private investment firm, has encountered another wrinkle in its otherwise massively successful South Korean operations – the former head of its Seoul office has admitted embezzling millions from the firm, according to a report in the Wall Street Journal.

Steven Lee, who joined Lone Star’s South Korean office in 1998, left the country for the US last year after tax authorities accused the firm of underpaying taxes related to profits on several successful deals, including the recent sale of portfolio company Korea Exchange Bank to Kookmin Bank for a $4.5 billion profit.

In a recent meeting with senior Lone Star partners in London, Lee, a US citizen, admitted to billing a fictitious consulting firm for services and then transferring those funds to private accounts controlled by him, according to the report. The questionable invoices were discovered by South Korean tax authorities and brought to the attention of Lone Star. Since last summer, Lee has reportedly been living with his family in Short Hills, New Jersey.

The report quotes Lee’s attorney, Lawrence Lustberg, as saying: “He has repaid all the funds that were misappropriated and paid all taxes due and owing.”

The report pegged the amount repaid by Lee at $10 million, more than what was misappropriated. Lustberg declined to confirm this amount.

Lone Star has reportedly filed suit against Lee in the Supreme Court of Bermuda seeking to cut Lee out of his ownership stake in Lone Star funds.

The embezzlement revelations come at an awkward moment for Lone Star – the firm is embroiled in a dispute with tax authorities over how much it owes in back taxes on the Korea Exchange Bank deal as well as other deals, such as an investment in Seoul’s Star Tower office complex.

A Lone Star executive has reportedly offered to pay the South Korean government a $104 million “donation” to settle the matter.