(EDITORIAL from The Korea Times on Nov. 26)

Betrayal of trust

Should people forgive officials for inflicting massive damage on national economy
due to misjudgment, provided they were well intended?

The answer is yes, according to the Seoul Central District Court's ruling Monday
on the controversial 2003 sell-off of Korea Exchange Bank (KEB) to Lone Star
Funds. The court cleared Byeon Yang-ho, a Finance Ministry director general who
handled the KEB sale, and two top bank executives from accusations they had
colluded with the U.S. buyout firm to facilitate the deal at a ``dirt-cheap"
price.
With the prosecution showing strong dissatisfaction with the ruling and court
proceedings, the legal battle will likely reach the Supreme Court, but the lower
court's decision leaves several points to ponder.
The court acknowledged there were some ``inappropriate deeds" by the defendants
in the sale process, but concluded it was hard to judge that they breached their
duty ``in a broader and stricter framework." Legal expressions are notoriously
abstract but the court added the fire sale was inevitable, as there were no other
would-be buyers (other than Lone Star). In short, it raised the hands of
defendants, who said in effect situations at KEB were so hopeless as to dispose
of it up to $550 million lower than market price.
Not all seemed to agree. Jeon Yun-churl, who served as both deputy prime
minister-finance minister and chairman of the Board of Audit and Inspection,
testified at the court that the situation was not so urgent in 2003 when the
nation had gotten out of the worst phase of the 1997-98 Asian crisis, and that
there was little danger of KEB going bankrupt, as other state-owned banks were
taking nearly half of its equity.
One should respect the court's judgment as far as the suspicion of personal
irregularities are concerned, such as Byeon's alleged receipt of about $40,000
from a Lone Star lobbyist, as well as KEB's $40-million equity investment into a
fund managed by Byeon later, which the court said ``cannot be seen as quid pro
quo."
It is of course difficult to appraise administrative judgment with judiciary
criteria. However, trying one's best to prevent the aggravation of the currency
crisis is one thing and suspected receipts of kickbacks for helping to sell off a
state-invested bank at unreasonably low prices is another.
Also difficult to understand is why the court rejected the prosecutors' request
to extend the hearing to present additional evidence, which could change final
results at the Supreme Court.
There has been sufficient bad press of the suit, both at home and abroad,
initiated by a civic group against foreign private equity funds' speculative
activities here, as ``damaging foreign investment and hurting sovereign credit
rating." The case is especially important, as the nation may fall into similar
situations to a decade ago, hit hard by the global financial turmoil.
Most governments are racking their brains on how to curb wayward activities of
greedy, morally dubious hedge funds, probably with the sole exception of the
Korean government, whose first and foremost economic slogan is still
deregulation.
Koreans are not against foreign investors. If they appear to be, it may be
because of governmental policymakers and regulators who fail to work out proper
devices to tell good investors from bad ones.
These officials may not be committing breach of trust legally, but they are
betraying the trust of people by neglecting what they are supposed to do.
(END)

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