A federal grand jury in Los Angeles investigating payments made by Northrop to two Korean organizations has subpoenaed former Northrop vice presidents Donald Foulds and James A. Dorsey, according to knowledgeable sources.
The grand jury earlier subpoenaed Northrop Chairman Thomas V. Jones, Executive Vice President Welko Gasich and former chief financial officer William J. McGagh, as well as the corporation itself.
The grand jury is conducting a criminal investigation into whether payments to Koreans made by Northrop in 1984 and 1986 in connection with its F-20 fighter program violated the U.S. Foreign Corrupt Practices Act.
The federal law prohibits payments by U.S. corporations to individuals who are officials of foreign governments or officials of political parties. A former Northrop consultant alleged in a letter to Jones that payments were made in an effort to buy influence in the South Korean government through setting up a bogus investment in the country.
Northrop made two agreements with Koreans to help sell its F-20 jet fighter. In one deal, Northrop paid $6.25 million as part of a joint venture with Asia Culture Travel Development to build a hotel in Seoul. The hotel was never built and Northrop's money disappeared. Northrop later sued, claiming it had been defrauded.
In the second deal, Northrop agreed to pay commissions of up to $55 million to a Korean organization, the Dong Yang Express Group, for assistance in marketing the F-20 to the Korean air force. In 1986, Northrop paid $1.5 million to terminate the Dong Yang agreement, even though its agreement did not require such a payment.
Both organizations were controlled by Chong Kyu Park, a former body guard to a Korean president and a politically powerful operator in Korea with his own wide business interests. Northrop denies that it knew at the time that Park was behind the two groups.
Foulds was the Northrop vice president in charge of counter trade, which involved investments Northrop made in countries that purchased the firm's weapons. Jan Lawrence Handzlik, Fould's attorney, confirmed that he had been subpoenaed to appear.
"The investigation will confirm that Mr. Foulds was involved in legitimate investment activities in Korea on behalf of Northrop," Handzlik said.
Daniel Bookin, a San Francisco attorney for Dorsey, declined comment. Dorsey was Northrop marketing representative for the Pacific area and was intimately involved in marketing efforts for the F-20.