A federal judge here yesterday ruled that the Internal Revenue Service acted legally in the 1977 seizure of property of a corporation owned by South Korean businessman Tongsun Park to help cover about $5 million in taxes Park allegedly owes the government.
U.S. District Court Judge Charles R. Richey ruled that, despite the flamboyant Park's contentions, his Washington-based Pacific Development Inc. (PDI) "served as a mere instrumentality of Park, existing to service his personal and economic desires."
As a result, Richey said that "to interfere with the government's attempt to assess Park's debts against PDI would be a serious injustice."
The judge said that "generally, a corporation is treated as a separate and distinct entity, independent of its owner." But he said that. in the case of Pacific Development, "Park treated the corporation as a mere pocketbook."
"Whenever he desired, he used the corporate funds for his own purposes, and he loaned the corporation money only as necessary to meet operating expenses. Overall there exists an inextricable unity between Park and PDI," Richey said is an eight-page opinion.
Walter Charlton, one of Park's Washington lawyers, reacted sharply to the ruling, saying, "You can be sure we'll appeal it.
"If the government can arbitrarily say a corporation is the same as a man," Charlton said, "then all the laws that Congress has passed limiting the powers of Internal Revenue have just been bypassed.
"It's a very scary thing." Charlton said. "We're very disappointed. We'd hoped the judge would have ruled otherwise, but that's what we've got courts of appeals for."
But sources close to the case said that the Internal Revenue Service will not automatically be able to take full control of Pacific Development's seized assets, put by one source at between $1.3 million and $1.86 million.
Park has filed suit in U.S. Tax Court here contesting the government's tax claims against him on grounds that he was not a U.S. resident for tax purposes. If Park were to win that case, scheduled to be heard in Paril, the government would not be able to claim the Pacific Development property, since no taxes would be owed.
Park, reported back in South Korea tending to his wide-ranging business affairs, has been the focus of the alleged South Korean influence-buying scandal in Congress. Last year he admitted giving more than $800,000 to about 35 House and Senate members, but denied allegations that he was acting as a South Korean government agent trying to purchase goodwill for his country.
The United States has granted Park immunity from prosecution in connection witht eh payments to the lawmakers, but, as part of that agreement, he still has to testify in two upcoming criminal cases, if the government wants him to, according to another Park lawyer, William Hundley.
In the separate civil tax case, the Internal Revenue Service seized the Pacific Development property, as well as two palatial houses owned by Park.
Included in teh Pacific Development property was about $5,000 to $10,000 in cash held in two local bank accounts, 50,000 shares of preferred stock in the International Oil and Gas Corp., worth between $500,000 and$1 million, three luxury automobiles worth about $50,000, equity from the sale of an office building at 1604 K St. NW, worth between $250,000 and $300,000, and other assets worth an estimated $50,000, including a condominium in Ocean City, according to sources close to the case.
Richey said that the "insulation [of corporations from their owners] provided by incorporation serves important goals, but when these goals are thwarted, when th fiction of separateness no longer serves the ends of justice, the law abandons the fiction and pierces the corporate veil."
Richey said that Pacific Development "is the alter ego of Tongsun Park. To treat PDI and Park as independent would ignore reality and be injust to Park's creditor, the United States."
The judge said taht Pacific Development's "meager investments were designed to prevent Park from realizing United States source income," which would have made him liable for federal income tax.
Richey said that PDI filed no income tax returns for the years 1968 through 1972. He said that throughout its history it "neglected to have a genuine board of directors" and that the listed board members were "mere figureheads serving as a courtesy to Park."
Richey said that from 1968 to 1973 Park used the corporation "completely for personal purposes." The judge said that Park used the corporate checking account as a personal checking account, made all important corporate decisions, viewed PDI emplyes as his own staff, paid his chauffeur from PDI funds and had PDI employes entertain his guests.