[Congressional Record Volume 144, Number 77 (Monday, June 15, 1998)]
[Senate]
[Pages S6345-S6346]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE CASE OF BONG KOO CHO
Mr. SARBANES. Mr. President, I would like to bring to the
attention of my colleagues the case of Mr. Bong Koo Cho, whose property
was confiscated by the Government of Korea in 1984. His daughter, my
constituent, Sally Cho, is a U.S. citizen and resident of Maryland who
has been actively involved in the effort to recover property. Recently,
the Los Angeles Times published an article about the case which details
the plight of Mr. Cho and his family, and I would ask that the full
text of the article be printed in the Record.
The article follows:
[From The Los Angeles Times, Sunday, Mar. 1, 1998]
From Afar, a Onetime Magnate Seeks Redress
(By Henry Chu)
Lawsuit: In a case filed in L.A. County, a S. Korean
industrialist claims the Seoul government and a rival firm
conspired to take his business.
From the window of his small Westside apartment, Bong Koo
Cho can gaze out at the ocean, but only in his mind's eye can
he look across to the life and land he left more than a
decade ago.
Then, Cho was one of South Korea's wealthiest businessmen,
the owner of Samho, one of the nation's biggest
conglomerates, and the head of a sprawling estate in the
heart of Seoul. Chauffeurs drove him around. Maids waited on
his wife.
But in 1984, his world was overturned. The government
abruptly declared Samho insolvent and confiscated the entire
construction empire, seized the family burial plot for good
measure, and handed his business to a rival firm. Already in
the U.S. for medical reasons, Cho had no choice but to stay,
reduced in health and lifestyle.
Now, the former entrepreneur and his family have sued to
recover their money and property, alleging that a conspiracy
between the South Korean government and their rival company
drove them out of business. In exchange for huge kickbacks,
the Chos say, South Korea's leaders concocted the bankruptcy
charge against Samho, then divided the spoils--nearly $2
billion worth in current value--among their friends.
The case is unusual in that the Chos are seeking redress in
Los Angeles County Superior Court even though the actions in
question took place 6,000 miles away.
But more than that, the lawsuit provides a unique rearview-
mirror look at the kinds of economic practices that first
turned South Korea into an economic power, and have now led
to its humiliating downfall.
Cho's was one of the numerous companies confiscated during
the South Korean government's ``rationalization'' of industry
in the early 1980s. As told by the Cho family, the episode
exemplified the history of collusion between South Korea's
government and business leaders, whose cozy relationship
means that political influence, nepotism and plain old graft
enrich the well-connected at the expense of a totally free
and open market. The International Monetary Fund, which is
now bailing out the nation's economy, has demanded an end to
such practices.
Critics call the system ``crony capitalism.'' Cho calls it
something else.
``This was highway robbery,'' said Cho, now 78. ``And it
was a very simple thing: The government just wanted a
kickbacks''--which Cho said he refused to pay.
What will not be so simple, legal experts say, is proving
his case, given that 14 years have elapsed since Samho was
swallowed up by a company called Daelim Industrial. Added to
that is the difficulty the Cho family may have in arguing
that a California court, rather than a South Korean or even
U.S. federal court, is the proper forum for them to air their
grievances.
``It's certainly an odd and difficult case for a California
state court to hear,'' says Greyson Bryan, an international
business lawyer in Los Angeles. ``It's a very sensitive
matter for an American court to become involved in an area
that's essentially diplomatic and political in nature.''
But Phil Trimble, a UCLA professor of international law,
said there is precedent for plaintiffs to seek justice in the
U.S. for illegal actions taken in foreign countries,
particularly if the actions violate international law. For
example, South American nationals have successfully sued
their government in U.S. courts for human rights abuses, such
as torture.
But those lawsuits filed in federal court and directed
against the foreign governments themselves rather than
private parties, as is the case in the Chos' lawsuit, which
names as defendants the two companies involved in Samho's
transfer.
The Chos' attorney, John Taylor of Santa Monica, counters
that the Chos are now U.S. citizens who are entitled to
relief within the state judicial system. According to Taylor,
the defendant companies used their ill-gotten gains to expand
overseas, including in California, which gives the state a
stake in ensuring that the companies doing business here were
established legally and that residents like the Chos are
compensated for any past wrongs.
``We feel jurisdictionally the money's here, [and] the Chos
are in the United States,'' Taylor said. The lawsuit has yet
to be assigned to a judge or served on defendants, pending
its translation into Korean.
At the time of its 1984 takeover, Samho ranked No. 9 on the
list of South Korea's biggest chaebols, or conglomorates.
Specializing in construction and infrastructure, the company
built thousands of housing units in Seoul; helped install the
city's subway; owned golf courses and a resort hotel; and had
major contracts in the Middle East.
Its success represented the rags-to-riches rise of its
founder, Cho, the son of minor landlords who fell on hard
times when he was a child. After running his first business
at age 19, Cho scraped through World War II--he hid in a
Buddist monastery to escape the Japanese imperial army
draft--then expanded his textile business, set up South
Korea's first sheet-glass factory and bet on a land boom by
slowly acquiring more than 1,000 undeveloped acres in
downtown Seoul by 1960.
``I could've bought more, but something like that would
have raised eyebrows,'' he said. ``I was raising eyebrows as
it was. That's a pretty massive holding.''
In 1970, Cho launched into construction on his many
properties in South Korea, amassing a fortune in real estate.
In 1975, he founded Samho, which concentrated on lucrative
government-ordered housing projects in Kuwait and Saudi
Arabia worth more than $1.5 billion.
[[Page S6346]]
But squabbles with the Kuwaiti and Saudi governments and
the headaches of working in an alien environment turned the
first two projects into losing ventures, said Yong See
(Peter) Cho, who took over Samho in the early '80s while his
father sought treatment abroad after a series of strokes.
Debts mounted to about $350 million on the Middle Eastern
contracts, although Samho was confident that its latest
project in Saudi Arabia would soon be turning in a tidy
profit.
That set the stage, however, for the South Korean
government's bankruptcy charge against Samho.
On the morning of Aug. 24, 1984, according to the Chos'
lawsuit, the South Korean finance minister summoned Peter Cho
to his office. The minister, Kim Mahn Je, curtly informed Cho
that Samho was on the list of insolvent companies being
targeted for ``rationalization'' by the government, part of
an effort to shed financially troubled concerns and shore up
the economy, Samho was to be taken over by Daelim Industrial,
a smaller conglomerate.
When Cho protested, Kim advised him to stay silent. An
officer with Cho Hung Bank, which worked out the details of
the takeover, also warned Cho not to contest the decision or
his physical safety would be threatened, the lawsuit alleges.
By day's end, Peter Cho has signed over his family's
controlling share of Samho.
``I'd been brought up in this country's system, so I knew
not to argue,'' the younger Cho recalled in an interview,
smiling bitterly at the memory. The next day, ``the 15
executives of Daelim came into my headquarters office to take
over, like little Napoleons, in their suits and black
neckties.''
Samho's assets included ``country clubs, farms, orchards,
driving ranges, shopping, centers, apartment [and]
residences,'' valued by the bank at a total of $250 million
but worth at least three times that, the lawsuit claims.
Even the family burial plot was seized, forcing them to
exhume the body of a son who had died years earlier and bury
him elsewhere. ``We were left with just about nothing,'' said
Kyung Ja Cho, 73, Bong Koo Cho's wife.
Her husband insists that his personal holdings could have
more than paid off the debts from the Middle Eastern
projects.
Instead, he said, the bankruptcy charge was merely a ploy
to oust him for his refusal to make large donations to then-
President Chum Do Hwan, and reward another company, Daelim,
whose chairman had a brother high up in the South Korean
government. The Chos' lawsuit alleges that Daelim agreed to
pay bribes to Chun's government and his family in exchange
for being given Samho.
A spokesman for Daelim in Seoul would not comment directly
on the allegations.
``It was such a long time ago,'' the spokesman said. ``Few
people in the company know about the alleged takeover, and we
do have any official position on the issue.''
Skeptics point out that Samho itself has flourished, in
part through government contracts, at a time when the South
Korean government regularly colluded the business to push the
tiny nation to its remarkable economic recovery since World
War II.
Ultimately, such government-business complicity and
cavalier lending practices helped pitch South Korea into its
current economic quagmire, requiring a bailout from the
International Monetary Fund. As a condition of assistance,
the IMF has demanded an end to crony capitalism and easy
credit.
Cho bristles at suggestions that he ever participated in
palm-greasing and cronyism.
``We never benefited from any relationship with the
government. We've been completely victimized by it,'' he
said, adding that other companies like Daelim have been the
ones proven corrupt.
Indeed, Lee June Yong, who has been the head of Daelim
throughout this period and whose brother was speaker of the
South Korean parliament under President Chun, was found
guilty in 1996 of paying a bribe to Chun's successor, Roh Tae
Woo. Lee was sentenced to 2\1/2\ years in prison but received
a pardon.
Daelim, meanwhile, has expanded significantly since
swallowing up Samho in 1984. Once a minor player, it is now
South Korea's 17th-largest chaebol, with a subsidiary in
Houston that just closed its doors in January because of the
escalating Asian financial crisis.
Also named as defendant in the Cho family's lawsuit is Cho
Hung Bank, which facilitated the takeover of Samho. The bank
has also gained a foothold in the U.S., setting up California
Cho Hung Bank, based in Los Angeles and worth about $31
million, according to Dun & Bradstreet. The U.S. unit is also
a defendant.
``It's groundless,'' California Cho Hung's attorney, Simon
Hung, said of the lawsuit. ``The allegations . . . seem to be
based on events that occurred many years ago, long before
California Cho Hung Bank was established here in the United
States. I don't know why they're bringing a lawsuit at this
time here in the United States.''
In fact, South Korea's own judicial system has already
heard a case similar to Samho's--and ruled in favor of the
confiscated company. In 1993, the nation's Constitutional
Court ruled that the Chun government had illegally dissolved
the Kukje conglomerate on trumped-up charges of insolvency in
1985. Kukje's previous owners are now demanding compensation.
But the Cho family feels that the best chance for
recovering what was once theirs now lies in the U.S. Bong Koo
Cho and his wife have nursed such hope for years as they
shuttled from home to home on the Westside, finally settling
in their current Brentwood apartment after giving up a
condominium in Santa Monica that they could no longer afford.
The Chos maintain their simply furnished one-bedroom
apartment with some financial help from their six adult
children, who all reside in the U.S. With their savings
dwindling, they have applied for low-income assisted
housing--a far cry from the days when the two presided over
their 15,000-square-foot antique-filled home back in Seoul.
Most of the last two decades have been spent trying to
restore Cho's health. His strokes left him partially
paralyzed, forcing him to walk with a cane.
``I cannot describe the pain of watching the man who built
Seoul's subway living out his last years in a small apartment
in Los Angeles,'' Sally Cho Seabright wrote about her father
in an essay to be published in a South Korean magazine.
``When I think of what my poor parents, indeed my whole
family, have suffered, it makes me cry.''
For Peter Cho, 47, watching Daelim and Cho Hung Bank
prosper in the U.S. has been especially galling. ``They
brought their money to this country and expanded their
business here. Obviously they must have brought my money in
here.''
He now lives in Pacific Palisades and stays afloat by
managing his father's sole source of income: a couple hundred
acres of farmland in Kern County, purchased a few years
before Samho's takeover in hopes that the area was ripe for
development.
``That's the only business mistake my father's made,'' said
Seabright, who lives in Maryland. Seabright has spearheaded
the family's efforts to tell its story, enlisting the aid of
a public relations firm in Washington and rounding supportive
letters from politicians such as U.S. Sen. Dianne Feinstein
(D-Calif.).
Her father, who hasn't returned to his homeland since Samho
was seized, mostly reads and watches CNN, monitoring events
in South Korea such as the inauguration Wednesday of the
country's latest president, former opposition leader Kim Dae
Jung. Jung has pledged to democratize the country further, an
announcement Cho greets with caution.
``I don't believe it's entirely desirable for Korea to copy
Western democracy and Western capitalism,'' Cho said. ``We
have different cultures. Democracy as it's practiced in Korea
will be different.''
But some form of democracy--including a free and open
business culture--must come, Cho said, if only to prevent
another situation similar to his.
``Something like this can never take place in a truly
democratic country,'' Cho said.
____________________