Report to Korea Assails Dealings by Northrop : It Details Unusual Links Between Aerospace Firm and Korean Businessmen

Arrangements that Northrop entered with Koreans to seek their help in marketing the F-20 jet fighter contained “grave defects” and were part of a plan to influence the South Korean government, according to an investigative report prepared for high-level officials in the Seoul government.

Some of the people linked to the Northrop deals were considered to be “gangsters” and “known hoodlums,” the report said. There were various attempts to extract money from Northrop once the Los Angeles aerospace firm had been put into an embarrassing position, the report indicates.

Northrop signed two agreements with organizations controlled by the late Chong Kyu Park, who once was chief bodyguard to a president of South Korea and was a politically powerful operator there with extensive business investments.

Eventually, Northrop made payments of $7.75 million to the Koreans, but the company now says it was defrauded in its dealings in South Korea and has filed a civil lawsuit in Seoul to recover $6.25 million of the money.

Questions Legitimacy

The issues are under review by the Justice Department and under investigation by the House Energy and Commerce Committee’s subcommittee on oversight and investigation. In addition, the South Korean government is looking into the agreements, and an outside law firm is conducting an internal probe at Northrop, reporting to the company’s board of directors.

It has been previously disclosed that Northrop made two agreements with organizations controlled by Park. In one, it agreed to build a luxury hotel in a joint venture with the Asia Culture Travel Development Co. The second agreement was with Dong Yang Express Co. in which that company was to provide marketing help to sell the F-20 to South Korea in exchange for a 2% commission, capped at $55 million.

The report, however, raises questions about whether the hotel deal was legitimate. It cites a key meeting in Tokyo at the Tokyo Prince Hotel, attended by Chong Kyu Park, Northrop Vice Presidents James Dorsey and Welko Gasich and a Northrop consultant, James Shin. At the meeting, Park is said in the report to have proposed a plan in which Northrop would pay $6.25 million, ostensibly to develop the luxury hotel, but that the funds “would be converted into the lobbying funds.”

Says Intentions Were Good

Northrop has said that it regarded the hotel venture as a legitimate business deal, part of an offset agreement to help South Korea balance its foreign trade. The company said it repeatedly attempted to get the venture going, but the hotel was never built and apparently never even received government approvals.

The report goes on to indicate that when Northrop paid the $6.25 million, it did so by wiring the money to a branch of the Korea Exchange Bank in Hong Kong. The report said “it is a matter of common sense that money for investment that comes from overseas” should be deposited in a bank within South Korea.

The money was divided this way, according to the report: $3 million went to Park’s personal bank account at the Marine Midland Bank in Singapore, $2 million went to Park’s brother-in-law, and an additional $1.25 million in cash was in Park’s personal possession. Park’s brother-in-law, Lee Min Ha, was chairman of Dong Yang.

Park died in October, 1985, setting off a rush by various Korean agents and individuals on the periphery of the deal to lay their hands on the money.

Wanted Money Back

Shin, a former Honolulu bar owner, was hired by Northrop in 1983 as a consultant and, according to court papers filed by his fourth wife as part of a pending divorce proceeding, was paid $102,000 per year to provide political connections in South Korea. Shin claimed that he had been appointed by Park to handle all transactions with Northrop.

Meanwhile, the report said, Northrop Vice President Donald Foulds visited Park’s widow and brother-in-law, demanding the return of the money. They reportedly told Foulds that they did not know anything about it.

Packages Sent

After Northrop indicated that it wanted to terminate the deals with the Park organizations, Charles Kim, a Korean American living in the United States, was reportedly hired by Park’s brother-in-law to negotiate the end of the agreements and Shin’s involvement in them.

Moreover, the report surmises that Park’s brother-in-law packaged various documents damaging to Shin and sent them under Shin’s return address to the FBI, the Internal Revenue Service and various U.S. news media, including The Times. (The Times did receive such a package of materials in 1987.)

In early 1986, the report said, Northrop had received a letter from Kang Se-hui, a Korean apparently working for Park’s brother-in-law. The letter alleged that Northrop’s $6.25-million payment was illegal and that Northrop conducted various undisclosed lobbying activities in the Korean National Assembly.

The investigation report claims that in the final paragraph of the letter, Kang asked for “equal rights and benefits” in Northrop’s South Korean deals. He declared that if the facts known to him were publicly disclosed, Northrop would fail to sell its F-20 jet fighter.

Severed Relationship

Later in 1986, another letter, obtained by The Times, was sent to Northrop by Charles Kim, laying out various demands for funds, totaling $16.5 million to terminate the Korean agreements.

Finally, on June 11, 1986, Northrop signed a termination agreement to sever the relationship with Park’s organizations. In connection with that agreement, Northrop paid $1.5 million, which was deposited in the account of Charles Kim, according to the report.

The investigation found that the contract signed between Dong Yang and Northrop contained no provision for paying premiums or penalties, such as the $1.5 million, according to the report.

To the end, according to the report, Shin attempted to regain his relationship with Northrop, which was severed in 1986. He hired an American attorney to help clear his reputation and to help him win a role in Northrop’s attempt to recover the $6.25 million, the report said.

But even then, Shin reportedly was quietly working in other avenues to lay claim to some of the Northrop termination money. The report said Shin and a Korean by the name of Bo Sook Park (no relation to Chong Kyu Park) received $400,000 from Lee Min Ha, part of the $1.5 million that Northrop had paid to Charles Kim, according to the investigation.

Pivotal Role

The report makes clear that Shin played a pivotal role in the Northrop agreements. Before his involvement with Northrop in 1983, Shin operated a Honolulu bar and various other retail businesses with varying success, had operated a bar in Saigon during the Vietnam War and served in the South Korean Marine Corps.

The report notes that “Northrop accurately understood James Shin’s role in the case. Northrop’s insight into Shin’s character may be an important aspect of the F-20 lobbying case.” Northrop has said that it was not aware of Shin’s background in the Honolulu bar business or his other business ventures.