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Lone Star may face another tax issue

  • Maya Ando
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Lone Star may face yet another tax issue, currently blocking its exit plan for its majority stake in Korea Exchange Bank (KEB).

Victor Song at the U.S. Internal Revenue Service Criminal Investigation (IRS-CI) team publicly said that his team is observing American private equity funds operating in Korea for tax evasion. If the team continues to investigate further, Lone Star may be required to pay tax on profits made from exiting its KEB stake to the Korean tax authorities. The Korea Times reported that Lone Star made the investment through a vehicle registered in Belgium, which has no tax treaty with Korea. Song publicly stated at the joint conference held earlier in Soul that private equity funds and hedge funds are areas where IRSCI’s interest lie.

The Dallas-based buyout group has been planning to sell its 51% control stake in the South Korean Bank to Hana Financial Group, the fourth largest local commercial bank, after the Carlyle Group emerged as a potential backer to Hana Financial. Previous interest by UK financial group HSBC Holdings, South Korean lender Kookmin Bank, and Australia & New Zealand Banking Group was scrapped after being held up by Lone Star’s legal difficulties.

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