S. Korea Arrests Executive Linked to Northrop Deal

South Korean authorities Monday arrested a Seoul businessman in connection with $3.5 million he received from Northrop to help sell the F-20 jet fighter, accusing him of criminal violations of the country’s foreign exchange laws.

The arrest of Lee Min Ha, chairman of a company Northrop hired as its sales agent in South Korea, marks the first formal government charges growing out of the controversial foreign payments that Northrop made between 1984 and 1986.

Those Korean payments, which total more than $7.75 million, are the subject of an investigation by a federal grand jury in Los Angeles and by a congressional committee. The investigators are looking into whether the payments violated the U.S. Foreign Corrupt Practices Act.

Northrop’s board has conducted its own independent investigation of the foreign payments and issued reprimands to some executives, including Northrop Chairman Thomas V. Jones. In addition, four Northrop vice presidents, including its former chief financial officer, have left the company since the controversy began to unfold earlier this year.

Korean press reports speculated that Lee would be charged with paying bribes to government officials, embezzlement and fraud, as well as the currency control violations, according to a deputy managing editor of the U.S. edition of the Korea Times. Some wire reports had indicated Monday that Lee was charged with bribery, but those reports are believed to be incorrect.

Lee’s attorney, Kim Jin Ouk, said in a telephone interview that Lee was arrested for violating only South Korea’s Foreign Exchange Control Act, which makes it illegal for a Korean national to receive payments in foreign bank accounts.

Won’t Contest Charges

“There is no evidence or accusation as of today that my client has paid any bribes to any government officials,” Kim said.

Kim said in the interview that he does not plan to contest the foreign exchange charges, and he did not dispute that Lee received payments of $3.5 million. But he said that if Lee is accused of any crimes related to buying influence among officials or illegally lobbying, “We’ll fight it.”

Northrop made payments to at least three Korean organizations controlled by the late Park Chong Kyu, a politically powerful operative with wide business interests, ostensibly to help market and finance the F-20 jet fighter.

The firm had agreed to pay $55 million in commissions to the Dong Yang Express Group if the Korean Air Force purchased 200 of the F-20s. Lee was Dong Yang’s chairman. Even though the company never sold any F-20s in Korea or any place else, it paid Dong Yang $1.5 million in 1986 to terminate its agreement.

In addition, Northrop paid $6.25 million to build a hotel in Seoul, which was intended to help Korea generate foreign exchange to finance the F-20s. The $6.25 million was deposited in a bank account in Hong Kong, according to congressional investigators. Park and Lee took part of the money, and $1 million was secretly paid to a Northrop consultant, Jimmy Shin, a former Honolulu night club operator, the investigators said.

Declines Comment

The hotel was not built and the money is unaccounted for. Northrop has filed a civil suit in Korea, charging that it was defrauded and seeking recovery of its funds from Park’s relatives. Lee was Park’s brother-in-law.

A Northrop spokesman declined to answer questions about Lee’s arrest, saying only: “Mr. Lee Min Ha is one of the individuals named in the lawsuit filed by the company a year ago charging fraud and conspiracy.”

Lee was detained for questioning by prosecutors and subsequently arrested on Monday, according to Kim, his attorney. A letter of indictment is expected to be handed down later this week, which should clarify exactly what he is charged with.

Northrop’s Korean payments are under investigation by the House Energy and Commerce Committee’s subcommittee on oversight and investigations, which held a lengthy hearing in September.

The arrest appears “to be dramatic new evidence and to be very significant,” Rep. Ron Wyden (D-Ore.), a member of the subcommittee, said in an interview Monday.”

Subcommittee Chairman John Dingell (D-Mich.) said the panel is ready to follow up its investigation early next year when Congress resumes.

Ralph Vartabedian reported from Los Angeles and Karl Schoenberger reported from Tokyo.