At 10 a.m. on a freezing Nov. 1, a thoroughly shaken Roh Tae Woo appeared before government prosecutors. The former South Korean President and four-star general had been summoned to answer questions about his $650 million secret slush fund. The interrogation lasted a grueling 18 hours.
The Roh revelations are rocking the nation's politics as well as business leaders and their U.S. and European partners. President Kim Young Sam, who succeeded Roh in 1993, has ordered a full investigation into which companies gave money to Roh--and for what (table). Says Kim: "I want nothing to be left out."
FALSE NAME. The scandal began to unfold on Oct. 19, when an opposition lawmaker produced copies of the passbook of a secret bank account. An executive of Shinhan Bank confirmed that the account, containing $40 million, was listed under a false name. It turned out the depositor was an assistant to Roh's head bodyguard. Under questioning, the two men confirmed the existence of other secret accounts. So far, the prosecution has located about $250 million held in various institutions. Roh says he spent the rest, though it's not yet clear whether it was for political reasons or for personal gain.
Opposition members of the National Assembly are having a field day speculating on the sources of Roh's funds. The favorite target seems to be General Dynamics Corp. The reason is that in 1989, the government decided to buy F-18s from McDonnell Douglas Corp. as Korea's main fighter aircraft. But that decision was abruptly overturned in March, 1991, and the government chose GD's F-16s instead. Korean press reports say Kim Jong-Hwie, Roh's national security adviser, helped broker the deal. He has recently sought political asylum in the U.S.
Although the allegations about GD have come up before--and been denied--the emergence of Roh's slush fund is giving the charges new life. "Roh received about $140 million from General Dynamics following the reversal of an earlier decision to buy F-18s in favor of F-16s," charges Kang Chang-Sung, an opposition Democratic Party member. GD notes that in 1991, the General Accounting Office issued a report concluding that neither GD nor its consultants made any payments violating U.S. laws. Says a GD spokesperson: "There is absolutely no truth to this allegation."
Other projects in which Roh was suspected to have received bribes include the $12 billion project to build Youngjongdo International Airport near Inchon. Bechtel Group Inc. and several Korean companies are designers or contractors. A Bechtel spokesman denies any illicit payments were made. On other deals, GEC-Alsthom was not available for comment, and Howaldtswerke-Deutsche Werft said its submarine sales were not affected.
NERVOUS TYCOONS. Most experts doubt that foreigners paid money directly to Roh. Their Korean partners are under greater suspicion, however, so chaebol tycoons are nervous. Given popular sentiment against the Korean groups, bribery convictions could send big names to prison.
One group that could face difficulty is Sunkyong. Chairman Chey Jong-Hyun's son is married to Roh's daughter, and press reports say he is suspected of helping Roh hide some of his ill-gotten wealth. "There could be names that no one would like to know," says a Daewoo Corp. executive. No Korean company has responded to the mounting allegations.
President Kim denies that he received any funding from his predecessor. If his denial sticks, he may be able to use the scandal to break the pattern of dirty political links that has dominated Korea. Ironically, that could also benefit Korean companies, who pay hefty percentages of their income for "contributions." Obviously, there is a great deal of cleaning up left to be done.
SOME KOREAN DEALS UNDER SUSPICION
PURCHASE OF F-16s Samsung/General Dynamics/$4.5 billion
SUBMARINES Daewoo/HDW/Value not available
FRIGATES Daewoo/Value not available
SEOUL-PUSAN HIGH-SPEED RAILWAY
SUPPLY OF LOCOMOTIVES GEC-Alsthom/$2.2 billion
CONSTRUCTION WORKS Hyundai, Samsung, Daewoo/$7.2 billion
MASTER PLAN Bechtel/Value not available
CONSTRUCTION Hanjin, Hyundai, Samsung, Halla/Not available