The South Korean government put pressure on a U.S. defense contractor in 1973 to help pay the costs of Tongsun Park's lobbying activities in Congress.
The company - E-Systems Inc., of Dallas - was told by a Korean ambassador that Park had helped it win a contract to make field radios for the Korean army.
Officers of E-Systems say the company refused to make the suggested payments to Park, who has since been indicted as an agent of the South Korean government. But E-Systems did hire other Korean businessmen a few months later. And federal investigators have found that much of the more than $1 million paid to these other Korean consultants was converted to cash and funneled back to an embassy official in Washington.
Some of the money, investigators believe, was used to make the same kind of illegal payments to American officials that Park has been accused of making.
E-Systems officials contend the commission payments were legitimate. They said the company did not know what happened to the money that they paid to the Korean businessmen.
E-Systems was initially approached by the Koreans through a letter, a copy of which The Washington Post has obtained from non-government sources.
The bluntly worded letter, dated April 11, 1973, was sent by Korean ambassador-at-large Yang You Chan to former Defense Department counsel John (Jeff) Davis. Davis later forwarded it to E-Systems. The letter claimed that Park had intervened to "pacify the congressional supporters" of a rival of E-Systems, thereby clearing the way for E-Systems' selection by the Korean government as a supplier of military radios.
"Since it was Tongsun's intervention that caused the project to be revived and since it is his guidance to which we look for our Washington operation (Congressional Military Appropriations), it goes without saying that it would be most advisable for you to recommend to your friends at E-Systems that they should accommodate Tongsun's requirements as well as E-System can, so that he can better serve his role," Yang wrote. (The misspellings are in the original.)
E-Systems is a major contractor for the U.S. intelligence agencies, and top officials often move back and forth between those agencies and the firm.
E-Systems officials have said they declined the overtures from Park. Four months later, however, the firm hired the Korean Research Institute, a group which included a close associte of President Park Chung Hee, to "assist" E-Systems in Korea.
Over the next three years, E-Systems paid $1.4 million in commissions to the KRI, through two Korean-born grocers who were the consultants' representatives in Los Angeles.
It is unclear what the KRI did to earn the money.
There are indications that as much as $1 million of these payments may have been converted to cash and funneled back to Col. Lee Hwan, a military attache at the Korean embassy in Washington.
Sources familiar with the investigation, for example, said that Howrd Lee, one of the KRI's men in Los Angeles, told the Securities and Exchange Commission that he took about $300,000 in cash out of the KRI bank account in Los Angeles in early 1976 and delivered it to his uncle, Col. Lee.
An earlier KRI representative in Los Angeles, Yoo Jong Ho, is Col. Lee's brother-in-law. Thus, it is considered likely that the more than $700,000 in previous E-Systems payments were handled the same way.
Col. Lee insisted in a recent telephone interview that he "didn't make even 1 cent of illegal payments in the United States."
When asked what he did with the money then, Lee said only, "That's a family matter, a private matter."
The colonel, who was a military procurement officer in Korea at the time of the E-Systems contract, also emphatically denied suggestions that he was part of the Korean Central Intelligence Agency. "Not even one day or one minute have I served with the KCIA," he said.
Lee, 43, complained in the phone conversation that previous news accounts of his involvement in the E-Systems case had hurt his reputation and stalled his expected promotion to general.
He agreed at first to meet with a Washington Post reporter, but then declined, saying his superiors would not give him permission.
Lee has been at the embassy since May, 1975.
SEC lawyers who have been investigating the propriety of the E-Systems payments for 18 months have said in court papers that they "have reason to believe" that some of the cash was passed on illegally to American officials.
Thus one investigative theory seems to be that the KRI might have been set up by the Korean government as an alternate way of funding the Washington lobbying effort after E-Systems refused to deal with Tongsun Park.
Yang, who wrote the letter reciting ark's prowess as a lobbyist, was the Korean ambassador to Washington in the 1960s and was a close friend of Park's. Yang is now dead. Davis, who is now a Washington lawyer, refused to discuss his role in the incident.
Federal investigators tend to believe Yang wrote the letter to promote Park. There is no indication they have uncovered evidence that the alleged Korean lobbyist unduly influenced congressional backers of E-Sytems' competitors, as the Yang letter claimed.
But investigators do find the letter remarkable for its candor about Park's activities in Washington. And they wonder if it shouldn't have made E-Systems suspicious about the later fees in connection with the same Korean radio contract.
Park, who apparently knew Davis and E-Systems' Washington representative Robert C. Smith from his days as a local party giver was indicated last August on charges he conspired to bribe members of Congress.
He is alleged to have generated the cash for the payoffs from commissions he received as the Korean government's exclusive agent on purchases of U.S. rice.
The Korean government has consistently denied that Park ever had any official connection with the Seoul regime. The Yang letter shows that the former ambassador at least was quite blunt in pointing out such ties.
A team of Justice Department prosecutors in Seoul has been questioning Park about his role in the Korean lobbying scheme in preparation for his later testimony at trials in the United States.
There have been reports that he described payments of some $750,000 to several former members of Congress.
In the 1973 letter to Davis Ambassador Yang referred to Park's activities in Washington to encourage U.S. funding of a plan to modernize the Korean armed forces.
Yang said that the five-year $1.5 billion program "has been placed in great jeopardy in recent years due to a series of negative actions taken by the U.S. Congress especially on the part of the Senate.
"In order to overcome this unfortunate occurrence as you well know our mutual friend Tongsun Park has been asked to initiate certain programs that would help our friends on the Hill to understand and appreciate why the modernization program is so vital," Yang wrote to Davis.
"I do not have to elaborate at least to you on how effective Tongsun has been in this regard" he added.
Yang then went on in the letter to outline Park's alleged role in "breaking the dead-lock" on the radio contract project.
"Our government felt that rather than offending some of our loyal friends on the Hill it should postpone the project itself indefinitely.
"However Tongsun was able to pacify the congressional supporters of your friends' competitor and thus paved the way for our government to resume the project which is so vital to our military communications system" the letter said.
Whatever park's role the story of E-Systems and the Korean radio contract provides a glimpse of the often cutthroat competition for defense contracts the role of foreign agents, the Pentagon, and the hometown congressman, and the consistent good luck of E-Systems, a company with such close connections to U.S. intelligence agencies that competitors often yell "foul" when it wins a contract.
Competitors have noted, for instance, that two of the Pentagon officials in the chain of command for approving the original E-Systems radio contract later went to work for the firm. That initial $8 million contract ballooned to more than $32 million over the years. The officials have denied any conflict.
E-Systems has received publicity in recent years over a deal where it bought Air Asia, one of the CIA's proprietary airlines, at a bargain rate in 1975, and over a sole source contract it received to build and maintain the electronic monitoring system in the Sinai desert. E-Systems is believed to be one of the CIA's prime contractors.
The individual drama of the E-Systems radio contract was only a small part of the modernization program which Ambassador Yang so pointedly referred to his 1973 letter to Davis.
It grew out of a commitment President Nixon made to the Koreans after he announced the first American troop withdrawals from the country in 1970. He pledged in 1971 that over the next five years, the United States would spend $1.5 billion to help up-grade the Korean military so it could eventually stand alone in defending the country.
A key part of this plan was a series of co-production agreements under which Korean companies would work with American contractors to build everything from radios to patrol boats and M-16 rifles.
Eventually, South Korean President Park Chung Hee hoped to use this American technology to a point where his industries could build their own jet fighters and warships as well.
The Washington Post pieced together a partial picture of the controversy surrounding the E-Systems radio contract from interviews with many of the participants and documents obtained from the Defense Department under the Freedom of Information Act.
The story began in 1969 when Electrospace Corp., of Westbury, N.Y., began negotiating with the Korean army about a deal to produce back-pack radios.
A year later, Electrospace joined forces in the project with a Korean firm, Oriental Precision Co., with the idea it had an exclusive working relationship.
In 1972, apparently because it thought the project would be financed by a U.S. grant, the U.S. Army solicited bids from both Electrospace and E-Systems. Electrospace was the low bidder, but the Army then determined that the financing would be partly a loan. This allowed the Korean government to choose the contractor.
A delay of several months followed and then in January 1973 an official of Oriental Precision Co., wrote Electrospace that "however unexpectedly," E-Systems had been picked for the contract, apparently on the recommendation of the Pentagon.
Electrospace officials reacted with cries of protest, including a call for help to their congressman, Rep. Lester Wolff (D-N.Y.:.
Sources close to the now defunct Electrospace firm said they asked Wolff to send a letter of protest, which the company had drafted, on to the Pentagon. No such letter was found in Pentagon files.
Wolff's social relationships with Tongsun Park Thomson, a former aide who later worked for then-House Speaker Carl Albert, are now under scrutiny by the House committee investigating the Korean influence-buying campaign.
Wolff said in an interview that he could not recall why he didn't intervene with the Pentagon for Electrospace, a company in his district, on the Korean contract.
But he emphasized that he never discussed this or any other business transaction with Park. Therefore, he said, he couldn't have been one of the congressional supporters of E-Systems competitor Park had "pacified," as Ambassador Yang's 1973 letter claimed.
Wolff's personal secretary last month was accused of lying to the House investigators when she said she had not removed Park's name from a file in the congressmen's office.
The formal co-production agreement to produce the radios was signed in August 1973. Later that year E-Systems made an initial $100,000 "commission" payment to the Korean Research Institute.
At the time the decisions to pick E-Systems was made, the assistant secretary of the Army for logistics was Eugene E. Berg, and the head of U.S. forces in Korea was Air Force Lt. Gen. Robert N. Smith.
Smith retired in October 1973 and went to work for E-Systems in Korea a month later. Berg resigned in mid-1974 and became an E-Systems vice president.
Berg was replaced in the Pentagon post by Harold L. Brownman, who had worked earlier for E-Systems and as a high-ranking official with the Central Intelligence Agency. Browman later oversaw extensions of the original contract won by E-Systems.
Berg Smith both have said they did nothing in their military jobs to influence the selection of their future employer for the contract.
The SEC has been investigating whether Smith received $10,000 in $100 bills from Col. Lee at the Korean embassy for some unexplained purpose.
Smith and E-Systems have declined to comment. E-Systems, in fact, has declined to answer any questions about its dealings on the Korean contract beyond the sketchy account its chairman, John W Dixon, provided in a letter to stockholders last March.
In that statement, Dixon said that "certain distinguished Korean citizens were selected to be our in-country representatives, giving us high-level visibility and assistance in the course of our performing the Korean radio contracts."
The individuals were checked with the U.S. embassy in Seoul "for reputation and integrity," Dixon said, and chose to call themselves the Korean Research Institute. Among the group was Park Chung Soo, a close adviser to President Park.
Just what the KRI did to earn its $1.4 million in commissions over the next three years is not clear.
Cho Hyun Chun, of the foreign trade department of Oriental Precison Co., said in a telephone interview from Seoul that his firm had never heard of the KRI or any of its representatives. He added that the KRI had played no role in arranging the co-production agreement or in assisting with additional sales.
Howard Lee, the designated KRI representative in Los Angeles, told the SEC that he did nothing but deliver cash for his uncle, the embassy military attache in Washington, according to sources familiar with his testimony.
Lee had succeeded another Los Angeles resident, Yoo Jong Ho - Col. Lee's brother in-law - as KRI's representative in the United States.
Lee said that an E-Systems official used to call him and tell him how much to bill the firm for KRI commissions, sources said.
During three months in the spring of 1976 he presented invoices totaling about $670,000 in this manner, he testified, and then wrote checks to "cash" on a Los Angeles bank account so he could give currency to his uncle, Col. Lee, according to the sources.
In June of that year - after the SEC investigaton began - more than $300,000 remaining in the account was transferred to a Kentucky bank. In November, Howard Lee wrote checks, which emptied the account, to a handful of other Koreans.
What happened to all that money is something the SEC and the different Justice Department and Capitol Hill investigators have been trying for months to determine. So far, there has been nothing to back up the SEC suggestions that some of the cash ended up inthe pockets of American officials.