The Epic Fall of a S. Korean Colossus

Kim Woo Choong was always proud of his resume: entrepreneur, global strategist, role model, philanthropist. From humble roots as a newspaper delivery boy, he built Daewoo Corp. into a global behemoth that at its height employed 320,000 people and accounted for up to 10% of the South Korean economy.

Now he can add another title: international fugitive.

Creditors and prosecutors allege that Kim’s “Great Universe”--Daewoo’s literal meaning--perpetrated one of the world’s biggest frauds. In the once-great company’s waning days, he allegedly directed his inner circle to inflate assets by about $33 billion to keep the badly listing ship afloat. Then he skipped town.

Since then, his 19-month flight has led to reported “Kim sightings” in Morocco, North Korea, Sudan and Germany, a golf course in Florida, a villa on the Riviera. Labor unions sent an “arrest squad” traipsing around Paris and Lyons, partly on bicycles, in a self-declared publicity stunt.

The government issued an arrest warrant in March although some suspect that the authorities don’t want him found, considering the huge sums he allegedly gave to politicians. Headlines speak of the “Invisible Man.”

Neither Kim nor his lawyer could be reached for comment.

A small cadre of ardent loyalists says that the man who rarely dodged a fight will one day return with a master plan to restore his great universe. But in a recent interview with the Monthly Chosun magazine, Kim’s attorney said that the Daewoo founder has cancer and is living in a budget European inn eating hamburgers, writing his memoirs and contemplating suicide. His wife is reportedly at his side.

Despite the ignominious last chapter, however, even Kim’s harshest critics credit this driven, complex man with major contributions to South Korea’s modern development. An epic figure with epic failings, Kim is in many ways a metaphor for a 40-year South Korean political and economic roller coaster, defined by cozy links between dictators and industrialists, decades of economic success and a dramatic crash in 1997.

The fourth of five children, Kim was born in 1936 in the southeastern city of Taegu. In 1950, his father, an elementary school teacher, was abducted to North Korea and never returned. This left Kim at age 14 to support his family. In a sentimental moment just before he fled, Kim told colleagues that he was a little tough guy. “When I fought with bigger kids, I might lose at first,” he said at a 1999 meeting in the Seoul Hilton. “But I always won in the end.”

Kim revealed his business acumen early on. Other boys sold newspapers on the streets before ending up at the crowded Taegu market. Kim followed suit and sold 30, but soon realized that if he ran directly to the market and stocked up on change, he could sell 60, eventually boosting the figure to 100.

He attended Seoul’s prestigious Kyunggi Boys High School with money his family scraped together and graduated from Yonsei University in 1960 with a BA in economics.

He got a job at Hansung Enterprises, a textile firm owned by his father’s friend, where his first assignment involved preparing documents and running them to the bank up to a dozen times a day. But he soon realized that the bank processed them only twice daily. So he cut back on the legwork, using the time to fill in boilerplate information in advance, sharply boosting the number of documents he delivered.

After seven years at Hansung, he borrowed $10,000 and started Daewoo in 1967 as a one-room textile export firm. One early contract involved selling dress shirts to a Japanese middleman for $1, who then turned around and sold them to American wholesalers for $2.30.

Sensing an opportunity, Kim traveled in 1970 to Chicago in search of the Sears, Roebuck & Co. building.

For several days, he badgered everyone in sight until a sales manager agreed to a sample order, leading to a contract that cut out the Japanese, boosted Kim’s profits and ultimately helped drive down retail prices by 70 cents a shirt. Before long, J. C. Penney and Montgomery Ward had signed on, leading to a $200-million export market for Daewoo.

These numbers soon caught the eye of South Korean President Park Chung Hee, especially when the strongman figured out that Kim’s father had been his elementary school teacher. Park reportedly nudged Korea First Bank to open its credit taps, and Daewoo suddenly had a very bright future.

A few years later, in 1976, the Park government offered to sell Daewoo a money-losing state industrial company called Korea Machinery. Kim turned it around in a year--it would become Daewoo Heavy Industries--setting his company on an expansion course. Over the next decade, he acquired troubled electronics, auto, shipbuilding, appliance and construction companies, earning the nickname “octopus emperor.”

As his tentacles grew, he worked tirelessly, traveled incessantly and rarely slept more than four hours a night. Paik Kee Seung, a longtime personal assistant, says in a biography that Kim didn’t take a single vacation day in 18 years, except when hospitalized for five days with internal bleeding.

Even then, Kim postponed the operation 30 minutes to finish a conference call with his directors, Paik writes in his book “You Can Create a Myth, but You Can Never Change History.”

Kim’s blistering pace exacted a price, however, particularly for his family. Daewoo, in effect, was his life. One company director in an interview recalled coming down to hotel restaurants on business trips and seeing Kim and his wife seated at different breakfast tables. In 1990, when Kim’s eldest son died in a car accident outside Boston, Kim kept on working.

“After our honeymoon, he never came home before midnight,” his wife is quoted saying in another biography titled “Great Challenges of Kim Woo Choong.” “I had no one to talk to, to take my kids to the hospital if they were sick or to help me when I got ill. He was truly a workaholic.”

In the public eye, however, his diligence earned him a reputation as “Korea’s Horatio Alger.” He was younger than the other tycoons, shunned alcohol and golf and didn’t staff his kingdom with relatives.

Colleagues say he washed his own clothes in overseas hotel rooms, had old suits patched and acted at times like a bumpkin, seeking out humble Korean spicy bean paste soup in exotic foreign capitals.

A Desire for Respect

What did seem to drive him was a desire for power and respect--the dramatic loss of which, say some insiders, might have been a factor in his decision to flee. He saw himself as a role model for young Koreans and reportedly flirted with a run at the South Korean presidency in 1992.

“I do not want to be known for being rich,” he wrote in his 1992 book of essays, “Every Street Is Paved With Gold.” “I do not see why a businessperson cannot attain the same respect accorded to a professor or an artist.”

In his business dealings, he often showed real vision, chipping away at Korean xenophobia and pushing Daewoo and the nation into foreign markets, in the process forcing South Korea to overhaul its trade laws and cut import tariffs.

“He was brilliant, that was the view in government at the time, and he gave us a real wake-up call,” says Chung Tae Seung, a former trade official and now deputy secretary-general of the Federation of Korean Industries. “The Korean economy was pretty protected, and he broke it open.”

He was a tough negotiator and a determined manager. In late 1987, when a striking worker at the company’s Okbo Shipyard died during a fight with police, he faced the angry crowd. “It was a brave thing to do,” says Sohn Nark Koo, executive director of the Korean Confederation of Trade Unions. “He cried in front of the workers and won their support.”

But Kim also had several weaknesses he imprinted on Daewoo, including a reputation for poor quality control behind the savvy marketing. Competitors say Daewoo vehicles were stylish but fell apart, construction projects were shoddily built, and company machinery was subject to breakdowns.

Outward appearance belied weaknesses in other areas as well. In the early 1990s, Daewoo Motors won the rights to build an auto plant in Poland by agreeing to export several thousand cars annually from the factory. After the plant was built, few foreign orders came in. Kim ordered the required number of cars be exported anyway but then had them disassembled and the parts shipped back to the Polish factory. This expensive shell game reportedly was a factor in Ford’s walking away from its planned takeover of Daewoo Motors last year.

Ex-trade official Chung says he saw firsthand the disassembly of Espero models at a small harbor in Slovenia as wheels and engines were repacked for shipment back to Poland.

Insiders say Kim’s ego grew in tandem with Daewoo’s size, that he stopped listening to his lieutenants even as he insisted on making all major decisions. As he spent more time on the road, entire lines of business would stall awaiting his attention. “Anyone who went against Chairman Kim’s ideas was sharply criticized,” says one former director, who asked not to be identified.

All the while, his “make it and I’ll sell it” bias and headlong expansion left the group badly stretched. Daewoo and the entire economy would soon pay a huge price for decades of inefficient management, weak accountability, cozy financing, preferential concessions and arrogance.

“In early 1997, I started to hear rumors that banks were demanding higher interest rates from Daewoo than Samsung, and loans were hard to get,” says a former Daewoo financier. “One day, a reliable bank source told me they were denying loans to Daewoo unless Chairman Kim came in personally. I was shocked.”

A Dependence on Loans

The Korean currency crisis in December 1997 quickly revealed how dependent Daewoo, other big companies and the economy at large were on short-term loans. As foreign financiers lost confidence in the system, Seoul accepted a humiliating International Monetary Fund bailout. The stock market plunged, families broke up, suicides spiked and tens of thousands of people lost their jobs.

Kim responded by falling back on his gambler’s instinct. He announced a series of restructuring plans, most of which were never carried out, and doubled down, betting that continued expansion would allow him to grow his way out of trouble.

“That’s what I find unforgivable; he just kept acquiring,” says Kim Joongi, an assistant professor of law at Yonsei University. “It was a giant house of cards.”

This time, however, the game was up. In July 1999, a month after the company reported strong results--based on what investigators now say were cooked books-- Daewoo collapsed, leading to Kim’s resignation. Insiders recall his stooped shoulders, unshaven face and bloodshot eyes. The former role model waited a few months and then quietly slipped out of the country.

Prosecutors now believe that the group for several years booked fictitious profits based on intra-company transfers and funneled $1.5 billion through a London fund to pay off politicians. This had a familiar ring: Kim got a suspended sentence in 1995 after charges that he bribed former President Roh Tae Woo. Prosecutors also say at least $1.6 billion is missing from Daewoo accounts.

“That’s enough to pay 10,000 workers for 76 years,” says the union’s Sohn. “He’s betrayed hundreds of thousands of workers and their families who sacrificed their livelihoods--even as he lived like a king on taxpayer-supported bank funds.”

Former insiders counter that Kim is not the type of man to embezzle money for personal gain and say that they believe the figures are exaggerated. “Chairman Kim became a scapegoat for everything,” says Paik, Kim’s biographer and former assistant, in an interview. “Korean reform efforts have not been very favorable as you can see today, and the government needs someone to blame.”

At the end of the day, however, many Koreans are left with a fundamental question. In the words of Wee Pyong Ryang, assistant director of the Citizens Coalition for Economic Justice, a nonprofit group: “Why would he run away if he doesn’t have anything to hide?”

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Magnier was recently on assignment in South Korea. Chi Jung Nam in The Times’ Seoul Bureau contributed to this report.