FBI Subpoenas Kim’s Records : Ethics: Former manager says material allegedly shows that the congressman ignored warnings to obey U.S. campaign laws. Kim has blamed problems on staff members.

As Rep. Jay Kim (R-Diamond Bar) launched his drive for reelection this month, the manager of his 1992 campaign said the FBI has subpoenaed campaign records allegedly showing that Kim ignored warnings from his staff to obey federal campaign laws.

William Silva, who was interviewed Feb. 18 by the FBI and IRS for two hours, said he told agents that he discovered early in 1992 that some campaign expenses had been paid with funds from Kim’s engineering corporation.

He said he warned Kim of the problem in a written report and gave Kim an informational video explaining that federal law prohibits corporations from contributing to federal campaigns.

Last week, the FBI subpoenaed hundreds of pages of campaign material, memoranda, promotional literature, videos, computer diskettes and reports from Silva, who is suing Kim for allegedly failing to pay him a $40,000 bonus.

A federal probe of possible election, tax and labor law violations was launched in July after The Times reported that Kim used about $480,000 from JayKim Engineers Inc. to finance his federal campaign.

Kim, the first Korean-born American to serve in Congress, did not return phone calls Tuesday. But Kim, whose 41st Congressional District includes portions of Los Angeles, Orange and San Bernardino counties, earlier said his staff was to blame for any campaign irregularities. He said he discovered during the 1992 campaign that his corporation had paid a few small campaign expenses, but that he always intended that the campaign would repay the money.

So far, records show, the campaign has not repaid any money to the corporation. And the corporation, which Kim sold last year to relatives, has forgiven the debt.

On Oct. 27, Kim’s son-in-law, David Kim, who now runs JayKim Engineers, directed company officials to write off $485,075 that was identified in company records as Kim’s 1992 campaign costs, records show.

David Kim did not return phone calls Tuesday. President Rodney Allen said the costs were written off, not as campaign costs, but as “normal business expenses.”

During Kim’s 1992 congressional campaign, records and interviews show, JayKim Engineers provided Kim’s campaign with free rent, staff and office supplies.

With Kim signing the checks, records show, the company paid campaign bills ranging from airline tickets to telephone service. The expenditures were not disclosed on campaign reports that Kim filed.

Kim’s former chief financial officer, Fred Schultz, said he provided Kim with a monthly tally of campaign expenses paid by the corporation. In a slander suit against Kim, Schultz said the congressman told him not to bill the campaign.

FBI agents who interviewed Schultz last summer and seized documents from JayKim Engineers had no comment, and neither did Assistant U.S. Atty. Stephen Mansfield, who is in charge of the investigation.

Silva said Kim brushed off warnings by him and other campaign staff members about use of corporate funds. Silva said he was upset and called the Federal Elections Commission hot line to inquire about his personal liability. “I saw this was bad business,” he said.

Silva said Kim assured him that he would handle the matter. “After that, I just bundled up the invoices and gave them to him to pay,” he said.

One of the invoices, Silva said, was for rent owed to the corporation for office space under terms of a lease.

Kim earlier said it did not occur to him that the campaign should pay rent for space, which totaled $17,000.

Last July, Kim hired a Washington election attorney and a prominent Republican accounting firm to review his books and determine what, if any, money was owed by the campaign to the corporation.

Kim initially said he would use his personal funds to pay their fees. He has reported spending $23,000 in campaign funds to pay the bills.

The accounting firm’s report has not been released, but Kim has said it concluded that his corporation should not have paid the rent or other incidental campaign expenses of $30,000 to $35,000.

Kim has said that he was entitled to his full-time salary during the campaign because he worked an estimated 40 hours a week on corporate business.

But Silva said he told FBI agents that Kim did not work enough on corporate business to justify collecting his full salary. “There is no way he was working on the business in the months of April and May, Monday through Saturday,” Silva said, adding that he kept a log of Kim’s political appointments.

Records show that Kim collected about $300,000 in salary, benefits and expenses during the campaign and after the election.

Silva said he first met Kim at the dinner where Kim announced his candidacy to about 30 close supporters. Records show that the catering bill of $946 was paid with a check from Jaykim Engineers, signed by Kim, even though the invoice carried a notation that it was a campaign expense.

Silva said he left Kim’s campaign after the June primary victory, when Kim allegedly broke a promise to pay him a $40,000 bonus. He sued the congressman last June. His attorney, Barry Besser, said he has rejected an offer from Kim’s attorney to settle the case for $7,000. Kim is scheduled to be deposed in the case April 2.

Kim founded JayKim Engineers about 16 years ago. With the help of government loans and contracts, the company flourished, at one point employing as many as 170 people in five offices.

Several relatively unknown Republicans so far have notified the secretary of state of their intention to run against Kim for the congressional seat.

Attorney James V. Lacy, who ran against Kim in the last election and lost to him by 1,200 votes in the primary, is considering running again. And Assemblyman Paul V. Horcher (R-Diamond Bar) said he is considering entering the race.