Two officials of the tax-exempt, Washington-based Korean Cultural and Freedom Foundation (KCFF) have petitioned the Justice Department for a court-appointed trustee to manage the charitable foundation's affairs and stop "further abuses" of its money.
Charles M. Fairchild and David Martin of the governing board of KCFF charged that the foundation's president, Bo Hi Pak, used falsified board minutes to borrow $1 million in KCFF's name. The money purportedly was sent to South Korea to build a school for the Little Angels dance troupe.
There are also indications, a Washington Post inquiry has found, that Pak used KCFF to move money to the United States for South Koreans, in possible violation of Korean currency restrictions and U.S. Internal Revenue Service regulations.
In addition, Fairchild and Martin said in a recent interview, they believe the foundation is being taken over by South Korean evangelist Sun Myung Moon's Unification Church. Bo Hi Pak is Moon's interpreter and reportedly his closet confidant.
Both Pak and Neil Salonen, president of the U.S. branch of the church, have long denied there is any connection between the foundation and Moon.
However, the $1 million in loans taken out by KCFF are backed by collateral furnished by Moon personally or by one of his church-related organizations.
And, last fall, in the midst of an internal feud among KCFF board members, director Henry H. Hurt of Baltimore wrote Pak that "KCFF has drawn within arm's length" of the church "because The Leader (Moon) is the spiritual and financial strength."
Within a year or two, Hurt added, he expected "KCFF to become as strong a cultural and relief arm" of the church as the Freedom Leadership Foundation, another Moon organization, would be the educational arm.
Besides the civil action they have requested from the Justice Department, Fairchild and Martin have taken their charges of Pak's alleged "financial irregulaties" to the Federal Reserve Board, which is examining Pak's purchase of stock in the Diplomat National Bank here, and the local U.S. attorney's office, which has subpoenaed KCFF financial records.
KCFF was formed in 1964 with the stated goal of fostering good relations between the United States and South Korea. Over the years, it has raised millions of dollars from Americans through emotional direct mail campaigns to support anti-communist broadcasts and aid starving children in Asia.
The best known KCFF project has been the Little Angels, groups of about 40 young South Korean girls who tour the world performing colorful Korean folk dances. They have appeared in Las Vegas with Liberace, as well as before Presidents Nixon and Ford and Queen Elizabeth of Britain.
Radio Free Asia, another KCFF operation, beamed broadcasts to North Korea, North Vietnam and mainland China from South Korean government transmitters in Seoul.
More recently, KCFF started the Childrens Relief Fund. The New York state charity board has barred KCFF have been under investigation by the Justice Department as part of a sweeping inquiry into allegations that South Korean President Park Chung Hee directed an elaborate scheme in the early 1970s to bribe U.S. officials to support aid for his regime.
American intelligence reports have placed Bo Hi Park at meetings in the South Korean Blue House where the influence-buying plans were discussed with President Park, top Korean Central Intelligence Agency officials, and Tongsun Park, the Washington-based South Korean businessman and party giver who was one alleged conduit for money given to U.S. officials.
According to the U.S. intelligence reports, those at the meetings also discussed diverting funds raised by KCFF, ostensibly for Radio Free Asia, to finance the early stages of the influence-buying campaign.
Bo Hi Pak, a military attache at the Korean Embassy here in the early 1960s, has denied any part in the influence-buying scheme. Fairchild, who is Pak's adversary in the internal KCFF dispute, said he has found no indication that money raised for KCFF projects like Radio Free Asia was siphoned off for political purposes.
He added, however, that he has seen no documentation proving that the millions of dollars Pak said he borrowed and raised for the Little Angels' school actually were used for that purpose.
In fact, in an extraordinary 33-page letter last month to an attorney arbitrating the KCFF board dispute, Pak acknowledged taking many of the actions that Fairchild and Martin have complained about.
In the Jan. 5 letter, Pak described his role in keeping KCFF alive after its shaky beginnings in 1964. He personally ran the KCFF direct-mail solicitation drive out of the basement of his Arlington home, he wrote.
Gradually, over the years, Pak assumed more and more power from the largely inactive board of directors. Many of the members did little beyond signing a form letter allowing their names to be use, he said.
He borrowed that $1 million for the Little Angels school, Pak said, because construction had to be completed before the end of 1975 to be approved by the South Korean government.
Pak told his secretary, Judith Lejeune, to sign unauthorized loan resolutions from the board "because I thought it was just a technicality imposed by the bank."
Indeed, a few days after the letter explanation, the foundation board approved the $1 million in loans - the first of which had been taken out 1 1/2 years earlier.
Pak also said he singled-handledly raised $2 million more in contributions for the Little Angels school between 1973 and 1976. His letter does not identify the donors or explain if or how the money was recorded on the foundation's books or its IRS tax returns.
Also in the letter, Pak acknowledged accepting "contributions to our Korean subsidiary" from persons who requested that "grants" be given to people they would name in America. Finding the recipients worthy, Pak explained, "we gave them the grant, or sometimes in a more strict sense, paid back the money we owed them."
Pak insisted that no Korean or U.S. law had been violated in the process. While declining to comment on the specifics of the KCFF procedure, an IRS spokesman said yesterday that "depositing" money overseas and then "withdrawing" it here in dollars "would probably violated the (currency) was of the other country."
Because the dollars being paid out here were not raised for the stated tax-exempt purpose, such transfers could also be considered "sham transactions," and if used extensively, could lead to revocation of the foundation's tax-exempt status here.
In one example of this KCFF operation, local Korean-language broadcaster, Lee Kwang Jae, said he sold some land in South Korea in 1975, and gave the proceeds in Korean currency to Pak.When he returned to the United States., Lee received checks from KCFF for that amount in dollars, $20,876.83.
In an interview the other day, Lee said he asked Pak to do that "favor" for him because his country's currency restrictions would not have permitted him to transfer the money from his land sale to the United States. He said he used the money as part of the down payment on his $110,000 house in McLean.
The internal struggle for control of KCFF involves many individuals: Pak, an articulate 46-year-old South Korean father of six who views the world around him with a stoic, outward calm; Fairchild, a controversial 54-year-old Alexandria developer and financial consultant who now believes he has been used by Pak and the Unification Church, and the Little Angels, the South Korean youngsters who have been their country's goodwill ambassadors to presidents and queens, and who may be the ultimate victims of this test of wills.
Finally, the story of KCFF is a tale of large amounts of money and how that money has affected the relationships between the small charity and two now apparently feuding institutions, Moon's Unification Church and the South Korean government.
Federal investigators probing the allegations of South Korean influence-buying here have long been puzzle by the relationship between Moon's church and the South Korean government.
At times there have been signs of mutual back-scratching. The Korean Central Intelligence Agency reportedly asked Moon confidant Bo Hi Pak to arrange a pro-Nixon rally on Capital Hill during the 1974 impeachment crisis.
Another top Moon aide, Choi Sang Ik, told a West Coast businessman that the church could get money into the United States through diplomatic channels if needed. And, in South Korea, Moon's businesses flourished while those owned by persons in disfavor with President Park did not.
In recent months, there are indications that this cooperative arrangement has changed. The first visible sign came last fall, when the Park regime refused to give the Little Angels exit permits to leave the country on a world tour.
Then 10 days ago, six top employees of Moon's ginseng tea exporting firm in Seoul were arrested on charges of evading $12 million in income taxes.
South Korean government sources have declined comment on its relations with KCFF or the Unification Church.
For Fairchild and Martin, who is a member of the staff of the Senate International Security Committee, the matter was simple, they said.
Concerned by press reports, Fairchild said he went through KCFF financial records and found dozens of instances of checks being written to persons he had never heard of, and of large checks being made out personally to Bo Hi Pak.
The Washington Post has since determined that some of the Koreans who received checks were members of the Unification Church. Others, such as local broadcaster Lee, were recieving American dollars for Korean currency they had given Pak in Seoul.
The checks to Pak, Pak said in his Jan. 5 letter answering the charges, were either to repay loans he had made to the foundation, or to pay expenses for Little Angels tours.
To substantiate his claim, Pak enclosed canceled checks showing he had made several payments to the foundation. There is no documentation, however, for $17,000 worth of "loans" he said he made to KCF in 1974 and 1975. Neither does he document $51,282 he says he let to the Korean branch of the foundation in July, 1974.
Faichild was unable to convince any of the other board members except Martin that Pak should be fired for his handling of KCFF accounts.
Early last month, Fairchild wrote the four local banks telling them the $1 million in loans had been obtained without proper authorization. But by their action approving the loans expost facto last month, the KCFF governing board backed Pak.