[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.

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