Pandora’s Box opens

K-Village is a popular spot in the heart of Korea Town in Flushing, New York. The three-story former noodle house is a focal point of the immigrant Korean community, hosting wedding banquets and big birthday parties.

Seven years ago, K-Village found itself in controversy. A local Korean-American organization claimed that the real owner was former President Kim Dae-jung and a slush fund of his was used to purchase the building. It held a press conference and insisted it had a recorded statement by the person who delivered the money from the slush fund. But the allegation soon fizzled out.

Park Chung Hee, too, was involved in a slush fund scandal. In 1975, at the time of the Koreagate influence buying scandal in Washington, the second son of former Korean Central Intelligence Agency chief Lee Hu-rak testified at a U.S. Congress hearing, “The money in the bank in Switzerland is a government slush fund for President Park, and my father managed it.” Two years later, the Washington Post reported Kim Hyung-uk, another former KCIA chief, disclosed that Park Chung Hee diverted 5 percent of all foreign investment to his Swiss account. However, the banks in Switzerland refused to disclose transactions of their clients in those days, and Park’s secret Swiss bank accounts were never revealed.

When you go to Los Angeles, New York or Hawaii, you often see prime real estate properties that are rumored to be owned by former presidents or powerful people from the past. At least six of ten of our former presidents have been accused of harboring assets abroad. When the daughter of former president Roh Moo-hyun purchased a condo in New Jersey in 2007, she transferred 1 million dollars unlawfully and the transaction came under scrutiny. It is an open secret that the families of Chun Doo Hwan and Roh Tae-woo possess real estate abroad.

Even Syngman Rhee, who died in exile in Hawaii, was not free from such allegations. While he was cleared of any financial wrongdoings, the media highlighted unverified reports that he had siphoned off more than $20 million to Hong Kong.

If these allegations are completely ungrounded, the men involved and their families must feel unjustly accused. However, let’s face the crooked reality. No one can blame the public for being distrustful. The UK-based Tax Justice Network (TJN) surveyed more than 180 developing nations and Korea was ranked in third place for the size of its hidden offshore funds. The only countries above it: China and Russia.

This is truly a remarkable achievement considering the tight regulation on foreign currency outflows in the past. Until the mid-90s, Koreans could not freely keep or use foreign currency. Stashing away a few thousand dollars used to lead to a prison sentence.

The more painful fact is that the size of offshore slush fund drastically increases during crises. TJN reported that the flight of capital drastically increased after the assassination of Park Chung Hee. The 1997 foreign currency crisis also resulted in a mass flight of capital. Shameless business owners pulled money out of failed companies and tucked it away in foreign accounts. The flight was so serious that then-attorney general Kim Tae-joung held a press conference and declared that he would strictly punish the captains of sinking ships who were pocketing their ships’ treasures while abandoning them and their crews.

Flight of assets abroad is normally illegally done and a crime. Even if someone takes the money to a tax haven through legal channels, such an act is ethically wrong. When they do not pay due taxes, the country loses tax revenues used for people in need.

Fortunately, the wall of financial secrecy is crumbling. In the past, dozens of ledgers would have to be taken and pored over to disclose lists of clients and transactions. But now, a flash drive has all the information. Moreover, the efforts of various nations have pressured the Swiss banks. Countries struggling with financial deficits want to collect tax from the citizens who hid money in tax havens. The United States waged an all-out war with Swiss banks and succeeded in obtaining lists of American clients in 2009. The United Kingdom and Germany have made similar moves.

Lately, a list of Koreans with offshore accounts in the Virgin Islands was disclosed and CJ’s slush funds abroad are under investigation. Now may be the best time to investigate the offshore assets of the rich and powerful.

We may also be able to disclose the hypocrisy of our leaders, including former presidents, or clear away undeserved accusations. Pandora’s Box is opening and we will be soon faced with many inconvenient truths.

*The author is a travelling correspondent and director of global cooperation at the JoongAng Ilbo.

By Nam Jeong-ho