And the "Heat" Goes On
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Korean radar suit goes to U.S. court
Lisa Girion Los Angeles Times December 05, 2002
LOS ANGELES When Loral Corp. hired Linda Kim in 1995 to handle its bid to supply the government of South Korea with airplane radar systems, the company was banking on her connections at the Blue House — Seoul’s presidential residence — and with other influential officials. What Loral did not count on was that the former model, lounge singer and Los Angeles nightclub owner would drag the company into an ongoing controversy over her alleged affair with the former defense minister who awarded the contract. Love letters from the minister to Kim, now 49 and living on a horse ranch in Santa Clarita, California, were splashed across the front pages of South Korean newspapers after the pair had been implicated in an earlier bribery scheme. The bribery and sex scandal stayed in South Korea until 1999, when the broker who had competed against Kim for the radar contract filed suit in Los Angeles. His lawsuit alleged that Loral had won the bidding unfairly, relying on sex and bribes, and that South Korean project managers had concluded that the system he represented, proposed by MacDonald, Dettwiler & Associates of Canada, was far superior and was $50 million cheaper than Loral’s. The lawsuit was due to reach a pivotal stage Wednesday in a California courtroom, where the state Supreme Court was to hear arguments over whether Lockheed Martin Corp., which acquired Loral in 1996, should face trial on the allegation that the contract had been won through unfair and illegal means. Lockheed denied having used Kim to gain unfair advantage in the radar contest. ‘‘The underlying bribery allegations are without merit, and we intend to defend ourselves vigorously,’’ a spokesman said. The case is being closely watched by many corporations as a test of California’s unfair-competition law and whether the law can be used more broadly to force companies doing business in the state to disgorge profits obtained improperly. At issue is whether Korea Supply Co., the rival broker, has the standing to sue to recover the $30 million sales commission it could have earned on the deal. The court also will decide whether Korea Supply can force Lockheed to disgorge its profit if the broker proves that sex and bribes helped it obtain the contract. The lawsuit relies on accounts in the Korean press that detailed U.S. intelligence reports linking Kim to officials in charge of South Korea’s defense contracts, including an article in 1998 that said she appeared to have control of an important national project ‘‘under her skirt.’’ The scandal has drawn the attention of federal authorities, who are using a grand jury in Los Angeles to pursue a criminal investigation. A spokesman for the U.S. Attorney’s office declined to comment, but Raytheon Corp. and Lockheed both reported receiving subpoenas this year seeking information on 1990s deals with South Korea, including Loral’s radar contract. Raytheon sold South Korea the Hawker 800XP airplanes that Loral equipped with its radar. In quarterly reports to securities regulators, the companies said they were cooperating with the investigation. They have declined to comment further. The focus of the federal investigation is not clear. The U.S. Foreign Corrupt Practices Act forbids U.S. companies from bribing foreign officials. Another federal law limits broker commissions to $50,000 per contract, far from the $10 million that the lawsuit alleges Loral paid Kim for her representation of its radar bid. According to a 1996 Loral memo obtained by the Los Angeles Times, the company appeared willing to pay Kim an initial commission of at least $5 million. Kim did not return telephone calls seeking comment. Her lawyer said Kim had not received a subpoena from the grand jury and had not been questioned by any law-enforcement authorities. In interviews with South Korean reporters, the former defense minister, Lee Yang Ho, acknowledged having had an ‘‘inappropriate relationship’’ with Kim but denied that it had anything to do with his contract decision. According to a 1995 Loral memo obtained by the Los Angeles Times, the company retained Kim because it believed she had extraordinary access to decision-makers at the ‘‘highest levels of the Korean Government, up to and including the Blue House.’’
< < Back to Start of Article LOS ANGELES When Loral Corp. hired Linda Kim in 1995 to handle its bid to supply the government of South Korea with airplane radar systems, the company was banking on her connections at the Blue House — Seoul’s presidential residence — and with other influential officials. What Loral did not count on was that the former model, lounge singer and Los Angeles nightclub owner would drag the company into an ongoing controversy over her alleged affair with the former defense minister who awarded the contract. Love letters from the minister to Kim, now 49 and living on a horse ranch in Santa Clarita, California, were splashed across the front pages of South Korean newspapers after the pair had been implicated in an earlier bribery scheme. The bribery and sex scandal stayed in South Korea until 1999, when the broker who had competed against Kim for the radar contract filed suit in Los Angeles. His lawsuit alleged that Loral had won the bidding unfairly, relying on sex and bribes, and that South Korean project managers had concluded that the system he represented, proposed by MacDonald, Dettwiler & Associates of Canada, was far superior and was $50 million cheaper than Loral’s. The lawsuit was due to reach a pivotal stage Wednesday in a California courtroom, where the state Supreme Court was to hear arguments over whether Lockheed Martin Corp., which acquired Loral in 1996, should face trial on the allegation that the contract had been won through unfair and illegal means. Lockheed denied having used Kim to gain unfair advantage in the radar contest. ‘‘The underlying bribery allegations are without merit, and we intend to defend ourselves vigorously,’’ a spokesman said. The case is being closely watched by many corporations as a test of California’s unfair-competition law and whether the law can be used more broadly to force companies doing business in the state to disgorge profits obtained improperly. At issue is whether Korea Supply Co., the rival broker, has the standing to sue to recover the $30 million sales commission it could have earned on the deal. The court also will decide whether Korea Supply can force Lockheed to disgorge its profit if the broker proves that sex and bribes helped it obtain the contract. The lawsuit relies on accounts in the Korean press that detailed U.S. intelligence reports linking Kim to officials in charge of South Korea’s defense contracts, including an article in 1998 that said she appeared to have control of an important national project ‘‘under her skirt.’’ The scandal has drawn the attention of federal authorities, who are using a grand jury in Los Angeles to pursue a criminal investigation. A spokesman for the U.S. Attorney’s office declined to comment, but Raytheon Corp. and Lockheed both reported receiving subpoenas this year seeking information on 1990s deals with South Korea, including Loral’s radar contract. Raytheon sold South Korea the Hawker 800XP airplanes that Loral equipped with its radar. In quarterly reports to securities regulators, the companies said they were cooperating with the investigation. They have declined to comment further. The focus of the federal investigation is not clear. The U.S. Foreign Corrupt Practices Act forbids U.S. companies from bribing foreign officials. Another federal law limits broker commissions to $50,000 per contract, far from the $10 million that the lawsuit alleges Loral paid Kim for her representation of its radar bid. According to a 1996 Loral memo obtained by the Los Angeles Times, the company appeared willing to pay Kim an initial commission of at least $5 million. Kim did not return telephone calls seeking comment. Her lawyer said Kim had not received a subpoena from the grand jury and had not been questioned by any law-enforcement authorities. In interviews with South Korean reporters, the former defense minister, Lee Yang Ho, acknowledged having had an ‘‘inappropriate relationship’’ with Kim but denied that it had anything to do with his contract decision. According to a 1995 Loral memo obtained by the Los Angeles Times, the company retained Kim because it believed she had extraordinary access to decision-makers at the ‘‘highest levels of the Korean Government, up to and including the Blue House.’’ LOS ANGELES When Loral Corp. hired Linda Kim in 1995 to handle its bid to supply the government of South Korea with airplane radar systems, the company was banking on her connections at the Blue House — Seoul’s presidential residence — and with other influential officials. What Loral did not count on was that the former model, lounge singer and Los Angeles nightclub owner would drag the company into an ongoing controversy over her alleged affair with the former defense minister who awarded the contract. Love letters from the minister to Kim, now 49 and living on a horse ranch in Santa Clarita, California, were splashed across the front pages of South Korean newspapers after the pair had been implicated in an earlier bribery scheme. The bribery and sex scandal stayed in South Korea until 1999, when the broker who had competed against Kim for the radar contract filed suit in Los Angeles. His lawsuit alleged that Loral had won the bidding unfairly, relying on sex and bribes, and that South Korean project managers had concluded that the system he represented, proposed by MacDonald, Dettwiler & Associates of Canada, was far superior and was $50 million cheaper than Loral’s. The lawsuit was due to reach a pivotal stage Wednesday in a California courtroom, where the state Supreme Court was to hear arguments over whether Lockheed Martin Corp., which acquired Loral in 1996, should face trial on the allegation that the contract had been won through unfair and illegal means. Lockheed denied having used Kim to gain unfair advantage in the radar contest. ‘‘The underlying bribery allegations are without merit, and we intend to defend ourselves vigorously,’’ a spokesman said. The case is being closely watched by many corporations as a test of California’s unfair-competition law and whether the law can be used more broadly to force companies doing business in the state to disgorge profits obtained improperly. At issue is whether Korea Supply Co., the rival broker, has the standing to sue to recover the $30 million sales commission it could have earned on the deal. The court also will decide whether Korea Supply can force Lockheed to disgorge its profit if the broker proves that sex and bribes helped it obtain the contract. The lawsuit relies on accounts in the Korean press that detailed U.S. intelligence reports linking Kim to officials in charge of South Korea’s defense contracts, including an article in 1998 that said she appeared to have control of an important national project ‘‘under her skirt.’’ The scandal has drawn the attention of federal authorities, who are using a grand jury in Los Angeles to pursue a criminal investigation. A spokesman for the U.S. Attorney’s office declined to comment, but Raytheon Corp. and Lockheed both reported receiving subpoenas this year seeking information on 1990s deals with South Korea, including Loral’s radar contract. Raytheon sold South Korea the Hawker 800XP airplanes that Loral equipped with its radar. In quarterly reports to securities regulators, the companies said they were cooperating with the investigation. They have declined to comment further. The focus of the federal investigation is not clear. The U.S. Foreign Corrupt Practices Act forbids U.S. companies from bribing foreign officials. Another federal law limits broker commissions to $50,000 per contract, far from the $10 million that the lawsuit alleges Loral paid Kim for her representation of its radar bid. According to a 1996 Loral memo obtained by the Los Angeles Times, the company appeared willing to pay Kim an initial commission of at least $5 million. Kim did not return telephone calls seeking comment. Her lawyer said Kim had not received a subpoena from the grand jury and had not been questioned by any law-enforcement authorities. In interviews with South Korean reporters, the former defense minister, Lee Yang Ho, acknowledged having had an ‘‘inappropriate relationship’’ with Kim but denied that it had anything to do with his contract decision. According to a 1995 Loral memo obtained by the Los Angeles Times, the company retained Kim because it believed she had extraordinary access to decision-makers at the ‘‘highest levels of the Korean Government, up to and including the Blue House.’’ LOS ANGELES When Loral Corp. hired Linda Kim in 1995 to handle its bid to supply the government of South Korea with airplane radar systems, the company was banking on her connections at the Blue House — Seoul’s presidential residence — and with other influential officials. What Loral did not count on was that the former model, lounge singer and Los Angeles nightclub owner would drag the company into an ongoing controversy over her alleged affair with the former defense minister who awarded the contract. Love letters from the minister to Kim, now 49 and living on a horse ranch in Santa Clarita, California, were splashed across the front pages of South Korean newspapers after the pair had been implicated in an earlier bribery scheme. The bribery and sex scandal stayed in South Korea until 1999, when the broker who had competed against Kim for the radar contract filed suit in Los Angeles. His lawsuit alleged that Loral had won the bidding unfairly, relying on sex and bribes, and that South Korean project managers had concluded that the system he represented, proposed by MacDonald, Dettwiler & Associates of Canada, was far superior and was $50 million cheaper than Loral’s. The lawsuit was due to reach a pivotal stage Wednesday in a California courtroom, where the state Supreme Court was to hear arguments over whether Lockheed Martin Corp., which acquired Loral in 1996, should face trial on the allegation that the contract had been won through unfair and illegal means. Lockheed denied having used Kim to gain unfair advantage in the radar contest. ‘‘The underlying bribery allegations are without merit, and we intend to defend ourselves vigorously,’’ a spokesman said. The case is being closely watched by many corporations as a test of California’s unfair-competition law and whether the law can be used more broadly to force companies doing business in the state to disgorge profits obtained improperly. At issue is whether Korea Supply Co., the rival broker, has the standing to sue to recover the $30 million sales commission it could have earned on the deal. The court also will decide whether Korea Supply can force Lockheed to disgorge its profit if the broker proves that sex and bribes helped it obtain the contract. The lawsuit relies on accounts in the Korean press that detailed U.S. intelligence reports linking Kim to officials in charge of South Korea’s defense contracts, including an article in 1998 that said she appeared to have control of an important national project ‘‘under her skirt.’’ The scandal has drawn the attention of federal authorities, who are using a grand jury in Los Angeles to pursue a criminal investigation. A spokesman for the U.S. Attorney’s office declined to comment, but Raytheon Corp. and Lockheed both reported receiving subpoenas this year seeking information on 1990s deals with South Korea, including Loral’s radar contract. Raytheon sold South Korea the Hawker 800XP airplanes that Loral equipped with its radar. In quarterly reports to securities regulators, the companies said they were cooperating with the investigation. They have declined to comment further. The focus of the federal investigation is not clear. The U.S. Foreign Corrupt Practices Act forbids U.S. companies from bribing foreign officials. Another federal law limits broker commissions to $50,000 per contract, far from the $10 million that the lawsuit alleges Loral paid Kim for her representation of its radar bid. According to a 1996 Loral memo obtained by the Los Angeles Times, the company appeared willing to pay Kim an initial commission of at least $5 million. Kim did not return telephone calls seeking comment. Her lawyer said Kim had not received a subpoena from the grand jury and had not been questioned by any law-enforcement authorities. In interviews with South Korean reporters, the former defense minister, Lee Yang Ho, acknowledged having had an ‘‘inappropriate relationship’’ with Kim but denied that it had anything to do with his contract decision. According to a 1995 Loral memo obtained by the Los Angeles Times, the company retained Kim because it believed she had extraordinary access to decision-makers at the ‘‘highest levels of the Korean Government, up to and including the Blue House.’’
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