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[EXCLUSIVE] Lone Star rebuts Korean government on settlement proposal

Lone Star Funds' settlement proposal sent to the Korean government last month / Courtesy of Justice Party lawmaker Bae Jin-gyo
Lone Star Funds' settlement proposal sent to the Korean government last month / Courtesy of Justice Party lawmaker Bae Jin-gyo

US PEF confirms it seeks to resolve 8-year-long conflict

By Park Jae-hyuk

Lone Star Funds managing director Christina Pretto
Lone Star Funds managing director Christina Pretto
Lone Star Funds has officially verified the authenticity of its latest settlement proposal to the Korean government after the administration refused the offer, raising doubts on the validity of the document containing it.

Christina Pretto, the global head of communications and public affairs at the United States private equity firm (PEF), told The Korea Times via email Tuesday that it was true her company sent the document written under the name of its general counsel Michael Thomson.

In the proposal, the U.S. firm asked Korea to pay $870 million to end their international legal dispute, which started in 2012 after the Texas-based fund filed a case with the International Center for Settlement of Investment Disputes (ICSID). In the case Lone Star claimed the Korean government should pay it $4.68 billion in compensation for the latter's "belated" approval of the sale of its Korea Exchange Bank (KEB) stake to Hana Financial Group.

"I can confirm that the letter is authentic, and reflects Lone Star's sincere proposal to resolve this long-running conflict," said Pretto, who is responsible for media relations at Lone Star.

Her remarks were an apparent refutation of an announcement by the Ministry of Justice (MOJ), which said Monday it would not accept the offer because it was hard to believe the document was an official proposal from Lone Star.

According to the ministry, a person surnamed Chae, who claimed he was a Lone Star adviser, sent the document to the government Nov. 3. The document states that Lone Star would immediately withdraw its claims against the Korean government and would commit to bringing no further claims, if the government accepted its offer. Lone Star set Nov. 30 as a deadline for a response.

"Chae was just designated as an adviser to Lone Star Funds, not a representative of Lone Star or its affiliates that filed the ICSID claim. We could not check whether or not the claimant officially hired him because there was no warrant attached," the justice ministry said in a press release. "The document did not include Lone Star general counsel Michael Thomson's title, only his signature, so it was uncertain whether he signed the document as a representative of the claimant or as an individual."

The ministry's announcement was a repetition of a civic group's claim made at a press conference, Nov. 25. The Citizens' Coalition for Economic Justice raised doubts about the validity of the document, calling for the government to refuse the offer.

The government has officially maintained the stance that it will settle the case at the international court without compensating Lone Star. It also created an international dispute settlement division under the MOJ in August to better handle legal disputes with international investors, including Lone Star.

Some observers attributed the sending of the document to Lone Star's concern about losing the case, but those familiar with the company disagreed.

AMCHAM Korea Board Chairman Jeffrey Jones, who was among the group of attorneys for Lone Star that Kim & Chang organized when the PEF was doing business here, told The Korea Times previously: "Lone Star has always preferred a compromise to litigation that takes time and results in winners and losers."

Industry insiders said Lone Star is more likely to defeat the government in the ICSID claim, because it lost to Hana Financial Group in separate litigation it filed alleging the Korean firm had deceived it to purchase the KEB shares for a lower price.

"The ruling in the Hana Financial case indicates the government is considered to blame for the price cut and delayed approval," a lawyer-turned-local PEF executive said on condition of anonymity.


Lone Star Funds' settlement proposal sent to the Korean government last month / Courtesy of Justice Party lawmaker Bae Jin-gyo
Lone Star Funds' settlement proposal sent to the Korean government last month / Courtesy of Justice Party lawmaker Bae Jin-gyo

US PEF confirms it seeks to resolve 8-year-long conflict

By Park Jae-hyuk

Lone Star Funds managing director Christina Pretto
Lone Star Funds managing director Christina Pretto
Lone Star Funds has officially verified the authenticity of its latest settlement proposal to the Korean government after the administration refused the offer, raising doubts on the validity of the document containing it.

Christina Pretto, the global head of communications and public affairs at the United States private equity firm (PEF), told The Korea Times via email Tuesday that it was true her company sent the document written under the name of its general counsel Michael Thomson.

In the proposal, the U.S. firm asked Korea to pay $870 million to end their international legal dispute, which started in 2012 after the Texas-based fund filed a case with the International Center for Settlement of Investment Disputes (ICSID). In the case Lone Star claimed the Korean government should pay it $4.68 billion in compensation for the latter's "belated" approval of the sale of its Korea Exchange Bank (KEB) stake to Hana Financial Group.

"I can confirm that the letter is authentic, and reflects Lone Star's sincere proposal to resolve this long-running conflict," said Pretto, who is responsible for media relations at Lone Star.

Her remarks were an apparent refutation of an announcement by the Ministry of Justice (MOJ), which said Monday it would not accept the offer because it was hard to believe the document was an official proposal from Lone Star.

According to the ministry, a person surnamed Chae, who claimed he was a Lone Star adviser, sent the document to the government Nov. 3. The document states that Lone Star would immediately withdraw its claims against the Korean government and would commit to bringing no further claims, if the government accepted its offer. Lone Star set Nov. 30 as a deadline for a response.

"Chae was just designated as an adviser to Lone Star Funds, not a representative of Lone Star or its affiliates that filed the ICSID claim. We could not check whether or not the claimant officially hired him because there was no warrant attached," the justice ministry said in a press release. "The document did not include Lone Star general counsel Michael Thomson's title, only his signature, so it was uncertain whether he signed the document as a representative of the claimant or as an individual."

The ministry's announcement was a repetition of a civic group's claim made at a press conference, Nov. 25. The Citizens' Coalition for Economic Justice raised doubts about the validity of the document, calling for the government to refuse the offer.

The government has officially maintained the stance that it will settle the case at the international court without compensating Lone Star. It also created an international dispute settlement division under the MOJ in August to better handle legal disputes with international investors, including Lone Star.

Some observers attributed the sending of the document to Lone Star's concern about losing the case, but those familiar with the company disagreed.

AMCHAM Korea Board Chairman Jeffrey Jones, who was among the group of attorneys for Lone Star that Kim & Chang organized when the PEF was doing business here, told The Korea Times previously: "Lone Star has always preferred a compromise to litigation that takes time and results in winners and losers."

Industry insiders said Lone Star is more likely to defeat the government in the ICSID claim, because it lost to Hana Financial Group in separate litigation it filed alleging the Korean firm had deceived it to purchase the KEB shares for a lower price.

"The ruling in the Hana Financial case indicates the government is considered to blame for the price cut and delayed approval," a lawyer-turned-local PEF executive said on condition of anonymity.


Park Jae-hyuk pjh@koreatimes.co.kr

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