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The Lone Star Scandal: Was It Corruption?

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Chapter Summary

The Lone Star scandal emerged as one of the biggest Korean news stories of 2006. The foreign fund faced allegations of corruption, of bribing financial authorities for favours through the below-market purchase price of publicly held shares in Korea Exchange Bank. Applying a functional definition and approach to measure corruption, favours and legal infractions serve as indicators to help us to determine whether or not corruption took place during the Lone Star takeover. Analysis reveals that while some laws and procedures were liberally interpreted, a lack of rent in the takeover signifies absence of large-scale corruption, particularly trivial in comparison to graft under previous Korean authoritarian regimes. This chapter answers whether Lone Star, the Ministry of Finance and Economy (MOFE) and the Financial Supervisory Commission (FSC) are guilty, as alleged, of committing large-scale ‘transactive corruption’, that is, exchanging rent for private favours.

Keywords: Financial Supervisory Commission (FSC); Korea; Lone Star scandal; Ministry of Finance and Economy (MOFE)



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