By Kim Tong-hyung
Staff Reporter


The National Tax Service (NTS) Tuesday decided to file a complaint with the prosecution against the former head of the Korean operation of Dallas-based Lone Star Funds for alleged tax evasion.

The tax agency also said it will report to the prosecution three or four incumbent executives of other foreign funds, such as the Washington-based Carlyle Group, on suspicion of tax evasion this week.

It claimed that Steven Lee, 36, the former head of Lone Star Funds Korea, has evaded income tax payments since he launched the fund’s Korean operation in 1998, although gaining millions of dollars in personal earnings during the period.

Lee, a Korean-American, stepped down last month from his post as the chief executive of the Korean business. He also left his post as an outside director of the Korea Exchange Bank, which is 51 percent owned by Lone Star.

Lee’s resignation came days after the NTS imposed 215 billion won ($207 million) in back taxes on five foreign funds including Lone Star.

The NTX claimed that the funds evaded capital gain taxes on transactions of stocks and other assets.

At the end of this month, Lone Star will be theoretically able to sell off its stake in the Korea Exchange Bank, the country’s fifth-largest lender, after a two-year lockup period.

According to taxation agreements between Korea and the United States, the Korean government has the rights to impose taxes on a U.S. citizen who stayed in the country for more than a year and gained income by providing services.

However, it is uncertain whether prosecutors will be able to directly question Lee over tax evasion allegations, as he is known to have left the country ahead of the tax agency announced the results of its tax probe on foreign funds last month.

Employees at Lone Star Funds Korea were not immediately available for comment.

The government has recently been tightening tax investigations of foreign funds operating in Korea, with the NTS leading a probe into two large and four small- and mid-sized foreign funds that have allegedly unfairly exploited loopholes in the tax treaty codes.

There have been increasing public criticism that policymakers have been allowing foreign funds to avoid the proper payment of taxes from huge profits they gained by acquiring troubled financial institutions and corporations following the 1997-98 financial crisis and selling them later.

thkim@koreatimes.co.kr