Former US Fund Chief Accused Of Korean Tax Evasion

by Mary Swire, Tax-News.com, Hong Kong

10 October 2005

Tax officials in South Korea have requested that prosecutors investigate the former head of Lone Star Fund's Korean operation and a number of other senior executives from foreign funds for suspected tax evasion.

Officials from the National Tax Service have revealed to the media that they have found evidence of both business and personal tax evasion by foreign investment fund executives, including Stephen Lee, who resigned as the chief of Lone Star's Seoul office last month.

"We decided to refer the individuals, instead of the funds themselves, to the prosecutors by the end of this week," one tax agency official was quoted by JoongAng Daily as stating.

"As soon as the case is reported to the prosecutors' office, certain measures, such as bans on leaving the country, will be imposed," the official added.

It is reported that Mr Lee, who had led Lone Star's Korean operation since 1998, had paid no income tax in the country despite a substantial income.

Last week, it emerged that six foreign fund firms have been landed with a total back tax bill of more than US$200 million by the National Tax Service, after an investigation which began earlier in the year.

The probe, which was started in April, came in response to growing public anger over the level of profits made by several foreign investment funds from the buying and selling of distressed South Korean assets in the late 1990s.

According to the NTS, the funds evaded taxes by nominally basing themselves offshore, paying high rates of interest to their overseas affiliates, using illegal expenses and failing to report securities transactions in accordance with the law.

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