Search for S. Korean official’s secret funds leads to O.C.

The South Korean public got a first glimpse of former President Chun Doo-hwan’s ill-gotten gains in 1996 — 25 apple boxes neatly packed with crisp bills.

The bills, the equivalent of several million dollars, were only a fraction of the more than $200 million Chun was ultimately found to have amassed in bribes extracted from corporations like Samsung, Hyundai and LG during his eight years as president.

When Chun was convicted on mutiny, treason and bribery charges, the South Korean courts also ordered him to pay $229 million in criminal restitution — a bulk of which Chun has long maintained he can’t afford, saying that he had less than $300 to his name.

On Thursday, the nearly two-decade hunt for Chun’s secret funds — a closely watched accounting for a figure who remains one of the most reviled in South Korea — found its way to Southern California. Prosecutors with the U.S. Department of Justice announced that they had located $721,951.45 — a portion of the value of a white clapboard home in Newport Beach that was owned until recently by Chun’s son and daughter-in-law.

The U.S. government filed a forfeiture action in Los Angeles on Thursday, moving to seize the proceeds from the home’s sale in February.

The story of how the fruits of corruption half a world away wound up in coastal Orange County is a painstakingly orchestrated, convoluted path that prosecutors here will have to retrace to claim the money.

Now 83, Chun came to power in a 1979 military coup after the assassination of a long-ruling strongman, and amid his ascension to power, he ordered troops to open fire at masses of students and citizens protesting in the city of Gwangju, causing hundreds of deaths. He declared martial law, ordered the Constitution rewritten and held a presidential election as the sole candidate. He eventually stepped down in the face of widespread protests.

Chun was initially given the death penalty after his 1996 conviction, but that was later reduced to life in prison and — ultimately — he was freed after his punishment was commuted. Even so, the restitution order remained in effect, according to the forfeiture complaint filed in Los Angeles. After paying a fraction of the amount, Chun has refused to pay more, saying that his assets totaled $290.

Chun’s denial has launched an international hunt for his secret funds, suspected of having been laundered through a wide network of shell corporations and nominee accounts. The effort to track down the money was increased last year because the statute of limitations was due to expire. Prosecutors in South Korea have already seized real estate, artwork, stocks and jewelry that they determined were derived from corruption proceeds.

As of August 2013, Chun still owned $167 million, according to the complaint.

According to U.S. prosecutors, the funds that ended up in Newport Beach were initially handed over from Chun to his father-in-law, Gen. Lee Kyu-dong. Chun admitted to South Korean prosecutors that he gave Lee the money in 1996 because he “feared that there may be a misunderstanding and that the money may be seized later, if [he] had a lot of money while [he] was being investigated,” according to the complaint.

The money was transferred in the form of housing bonds from Lee to Chun’s second son, J.Y. Chun, who allegedly spread the money into dozens of accounts in other people’s names.

After initially denying that the money came from his father, the son eventually admitted to South Korean prosecutors: “I always thought of the [funds] unconditionally as my father’s money. It is true that I did as such. I am very sorry about that now,” according to the forfeiture complaint.

A business partner and friend, Ryu Chang-hee, told South Korean prosecutors in 2013 that the younger Chun asked him to buy real estate in the name of Ryu’s father to “dodge suspicion” because he didn’t have the income to justify such a purchase, according to the complaint.

Over the years, J.Y. Chun has funneled hundreds of thousands of dollars into the U.S. financial system, prosecutors alleged in court papers. In 2003, he and his wife purchased a home outside Atlanta with suspected corruption proceeds. In 2005, they sold that home and purchased the Newport Beach property for $2.24 million, with a nearly $1-million down payment.

Neither J.Y. Chun nor his wife had an income that could prove the money for the home was legitimate, prosecutors alleged. The younger Chun reported annual income of $20,000 to $50,000

His wife, former starlet Park Sang Ah, is also suspected of having lied on the mortgage application for the home — she allegedly told immigration authorities that she hadn’t worked since 2003, yet claimed on the application that she was president of a company and made nearly $500,000 a year.

Representatives for the Chuns could not immediately be reached for comment Thursday.

victoria.kim@latimes.com