LONE STAR PROBE UNLIKELY TO HIT FOREIGN INVESTMENT: S.KOREAN MIN.

SEOUL, April 3 Asia Pulse - The investigation by the state prosecutors office against alleged illegal activities by U.S. buyout fund Lone Star is not likely to have a detrimental effect on foreign investment here, Minster of Commerce, Industry and Energy Chung Sye-kyun said Saturday.

"If the investigation is carried out in accordance with domestic law and globally accepted practices, there is no reason to be concerned about repercussions," Chung said in a meeting with reporters.

He did not say whether he believed illegal activities occurred, but said that state prosecutors and the tax office must have due cause for confiscating papers and files from Lone Star's offices.

On Thursday, prosecutors raided Lone Star's Seoul office and its local unit outside the Korean capital to gather evidence of the company's alleged business irregularities.

The raid came after tax authorities here ordered the U.S. equity fund to pay 147 billion won (US$15.1 million) in taxes, suspecting the Dallas-based company of evading taxes and breaking foreign exchange rules through the use of a tax haven.

It also came as Lone Star was moving to sell its controlling stake in Korea Exchange Bank (KEB), a transaction expected to bring the U.S. fund billions of dollars in profits.

The state prosecutors office also said their investigation aims to look into allegations of possible irregularities surrounding the U.S. fund's takeover of KEB in 2003.