Korean Contact

By Robert T. Grieves

Charges against Bechtel

The 39,000 employees at Bechtel, the international construction firm with headquarters in San Francisco (1983 revenues: $14 billion), rarely get much personal correspondence from Chairman Stephen Bechtel Jr., 58. Many of them therefore were surprised last week when they received an eight-paragraph "management memo" directly from the chairman and signed simply "Steve." Once they started reading, surprise turned to shock. "Over the weekend," began the memo, "you have probably read or heard news-media reports of allegations that a consultant may have made improper payments in Korea. These allegations are very serious since they attack our most valuable asset--Bechtel's hard-earned reputation for honesty, integrity and high business ethics."

Bechtel issued his memo in response to charges that will soon be published simultaneously in Mother Jones and Multi-national Monitor, both liberal, investigative magazines. The articles maintain that between 1977 and 1980 Bechtel Power, a subsidiary, funneled an estimated $72,000 in cash and duty-free golf clubs and appliances to key South Korean officials in order to help win four nuclear-power-plant contracts worth more than $400 million. If that is true, the payments violate the 1977 Foreign Corrupt Practices Act, which prohibits U.S. businessmen from making payments to foreign officials in order to win contracts. Moreover, the articles say that Defense Secretary Caspar Weinberger, Bechtel's general counsel at the time, and Secretary of State George Shultz, then Bechtel's vice chairman, were in a position to know about the bribes.

The source of the allegations is Daniel Charboneau, 52, a former Roman Catholic priest who arrived in Seoul in 1978 as a Bechtel employee and now teaches English at U.S. Army camps in South Korea. Charboneau says that he regularly cashed Bechtel checks at the local Bank of America branch and then handed the money to the company's Korean-American consultant, Yoon Sik Cho, 61. From Cho the money may have gone directly to South Korean officials, but the evidence remains circumstantial. Last week Charboneau, whose perusal of business records led him to suspect Cho of using the funds for payoffs, told TIME: "I don't know frankly whether it was used to bribe Korean officials, but the way the money was given to Cho caused suspicion."

Charboneau has made sure that Washington knows about the case. After being fired from Bechtel following a disagreement with Cho in November 1980, he suggested to IRS agents that Cho may have underreported his income and possibly violated the Foreign Corrupt Practices Act. IRS investigators subsequently found that in 1979 Cho had not reported at least $34,000 in consultant's fees and had $146,000 in insufficiently documented business expenses. Cho, through his attorney, has said that he can account for all his income and expenses and has denied that he made any improper gifts or payments.

There is no evidence that Weinberger or Shultz knew of any improper payments, if such were ever made. At the Pentagon, Spokesman Michael Burch issued a terse statement: "We consider the story to be complete nonsense." Shultz said simply, "This is a Bechtel matter and any statements made about it would appropriately be made by the Bechtel Co." At Bechtel, the chairman ended his memo by writing that both Weinberger and Shultz "are men of very high principle who would never associate themselves with any activity that they believed improper."

The Bechtel case nonetheless puts the Reagan Administration in an awkward position. Since it took power, it has been trying to weaken the Foreign Corrupt Practices Act, which was passed in the wake of the scandal concerning Lockheed's alleged payments to top government officials around the world. The Administration has argued that the law, which states that a corporation is guilty if it has "reason to know" that its agents are making illegal payments, is too vague.

Since the Bechtel case became public two weeks ago, the Administration has appeared to back away from its plans to revise the act. --By Robert T. Grieves. Reported by Robert Buderi/San Francisco and K.C. Hwang/Seoul

With reporting by Robert Buderi, K.C. Hwang