Ex-Finance Chief Says Kim Knew Firm Paid Expenses : Politics: Former company official says he gave congressman a tally of campaign expenditures.

The former chief financial officer of an engineering firm owned by Rep. Jay C. Kim (R-Diamond Bar) said Saturday that Kim knew the company was spending thousands of dollars on campaign expenses but had ordered him not to send the campaign a bill.

Fred Schultz said he provided Kim with a running tally of campaign expenses that had been paid by JayKim Engineers.

“Every month I gave him a copy of the printout,” Schultz said. “I put it in a confidential envelope, sealed it and put it on his desk.”

Schultz, who was laid off from the financially troubled company in May, said Kim earlier had told him not to bill the campaign for these expenses.

An undated memo written by Schultz and obtained by The Times said: “Jay Kim . . . told me never to bill the campaign for anything since the campaign has no money. He was assertive in that statement to me.”

In his memo and interview, Fred Schultz contradicted Kim’s explanation of alleged campaign irregularities in the 1992 congressional campaign. Kim previously has called Schultz a disgruntled former employee and blamed him for not promptly sending him a bill for campaign expenditures by the corporation.

Kim could not be reached at his home or office Saturday. Kim’s attorney, Jan Baran of Washington, said he has interviewed Schultz but would not discuss what Schultz said. As for what Schultz has told The Times, he said he could not comment on it. “One of the things I’m trying to evaluate is Mr. Schultz’s own credibility,” Baran said.

The Times reported last week that Kim improperly used hundreds of thousands of dollars from his engineering corporation to pay campaign expenses last year, at the same time his corporation was slipping toward insolvency, unable to pay its bills or taxes.

Although federal election law prohibits corporations from providing any money or services to federal campaigns, records show that JayKim Engineers provided Kim’s campaign with free office space, supplies and staff. The firm also paid Kim’s full-time salary and expenses during the 1992 election, as well as campaign bills ranging from airline tickets to telephone service.

Kim has said that he ordered his staff at JayKim Engineers to set up a special company account to keep track of campaign expenditures by the corporation, so the campaign could promptly repay the cost--which he estimated is less than $1,000. He said he repeatedly asked Schultz to send the campaign a bill. But he said Schultz never did.

At the beginning of the campaign, in February, 1992, Schultz said he wrote a memo to his file.

The memo begins: “Since Jay Kim decided that he was going to run for elected office, I felt it was best to open a (special election account) to accumulate any expenses that may be passed through the company via the campaign.”

Kim opposed setting up the account, according to the memo. “He insisted that there would be no campaign expenses passed through the company,” it stated.

Company records show that the campaign got free use of two offices in the headquarters of JayKim Engineers, space worth an estimated $17,000 to the campaign.

The memo said that Schultz asked Kim whether the campaign was going to pay rent for the space. “He (Kim) informed me that was not my concern,” Schultz wrote. “He would take care of that situation himself.”

Kim has told The Times that it did not occur to him that the campaign should pay for the space it occupied.

Kim has said he will pay back “whatever I owe” with interest. He has hired a prominent Washington accountant, who served as treasurer to former President George Bush’s election campaigns, to help decide if he owes anything.

The Federal Elections Commission in Washington has been asked by one of Kim’s primary opponents to investigate the allegations of election irregularities. The U.S. attorney’s office in Los Angeles also is reviewing the matter.

A six-page computer printout of campaign and post-election costs prepared by Schultz and his staff shows that JayKim Engineers spent $481,000 on campaign-related expenses. Most of it was Kim’s salary and other costs of carrying him on the payroll.

Baran said that although he has just started his investigation for Kim, he has concluded that “the suggestion that there were more than $400,000 in campaign-related expenditures is an exaggeration. It’s just not true.” He did not elaborate.

Schultz said he could not be completely certain that every cost listed on the printout was a campaign expense. He said the costs did not appear to be legitimate business expenses, so he reasoned they “could well be” campaign related.

Kim has said he was entitled to his full salary because he worked about 40 hours a week on company business, including every morning and on weekends. Schultz said Kim was “never around” the firm.

Schultz said half the cost of the marketing department was allocated to the special election campaign because “it was clear to me that the marketing staff was not devoting 100% of its time to the marketing activities of the company.” Kim said no one worked on his campaign on company time.

Kim has blamed Schultz for the company’s practice of taking short-term loans from its profit-sharing plan to meet payroll costs. The loans since May, 1992, amounted to about $170,000, all of which has been repaid.

Schultz said he strongly objected to the borrowing, which is prohibited by labor and tax laws, and that the practice started before he was hired by JayKim Engineers three years ago.