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North Korea’s Dollar Store
Office 39, North Korea’s billion-dollar crime syndicate, pays for Kim
Jong
Il’s missiles and cognac. Why did the Bush White House choose not
to shut it down?
By David Rose WEB EXCLUSIVE
August 5, 2009
Appropriately enough, I met Chen Chiang Liu on Las Vegas Boulevard.
But it wasn’t at one of
the casinos on the Strip that he loved so
well; it was in a different kind of building a few miles to the
north—the
Lloyd D. George U.S. District Courthouse. Peering through
the heavy mesh screen in a holding cell, he was a very unhappy
man.
Understandably so. It was March 5, 2009, and later that morning, he
was due to be sentenced. Liu had been convicted
of conspiracy and
fraud involving millions of dollars made not by the Bureau of
Engraving and Printing but by counterfeiting
presses in a foreign
country, presumably North Korea. The quality of these “supernote”
forgeries is so high
that he’d managed to pass enormous quantities
through the electronic detection devices with which every Vegas slot
machine
is supposed to be equipped. The prosecutor was asking the
judge to give him close to 25 years, and in the end Liu would
receive
more than 12.
David Rose discusses North Korea’s counterfeiting operation and shares
footage from
the F.B.I.’s investigation.
Liu’s crimes threatened not only the integrity of America’s currency
but
the very fabric of international peace. They were part of a vast
criminal enterprise believed to be controlled by the North
Korean
state, set up and used to finance its nuclear-weapons and
ballistic-missile programs. All of this, intelligence
analysts say, is
coordinated by a secret agency inside the North Korean government
controlled directly by “the
Dear Leader,” Kim Jong Il, himself. The
agency is known as Office 39. (Given the opacity of anything inside
North
Korea, experts differ on whether “Office” should be “Bureau” or
even “Room”—and
they also suspect that the number itself may change.)
Until a few years ago, American law enforcement had Office 39 squarely
in
its sights—probing its networks, disabling its enablers, and
gradually shutting off the sources of illegal hard currency.
And then,
peremptorily, the Bush administration shut this law-enforcement effort
down.
Liu, who was born in Taiwan
in 1962, uses the first name Wilson. He
owed his fate to the trips to Vegas that he and his wife, Min Li, used
to make
every weekend from their home in San Marino, a wealthy
neighborhood of Los Angeles. “My two daughters like the swimming
in
the pools and all that, so the whole family come to go swimming,
shopping, and eating,” Liu said wistfully.
“We see the shows, like
Celine Dion: oh, her songs touch my heart. And in the evenings, we
play the slot machines.”
Before
Liu was finally apprehended, at Caesars Palace in July 2007, he
used the casinos to launder counterfeit “supernotes”
with a nominal
value of several millions of dollars. Most of the notes have ended up
in general circulation.
Chen
Chiang Liu
Chen Chiang Liu, a.k.a. Wilson Liu, in custody.
On April 4, 2009, 30 days after Liu was sentenced,
North Korea
launched its new Taepodong-2 long-range ballistic missile, a vehicle
that, if successful, may be capable
of reaching parts of the United
States. The test brought immediate condemnation by the United Nations
and many governments.
North Korea denounced this reaction as an
“unbearable insult” and expelled inspectors from the International
Atomic
Energy Agency. It had already withdrawn from international
talks on its nuclear-weapons program. On May 25, North Korea
conducted
an underground nuclear-weapon test, the detonation of a device said to
be as powerful as the one that destroyed
Hiroshima in 1945. Again
ignoring international protests, North Korea the next day fired three
short-range missiles.
On July 4, North Korea was at it again, firing
seven missiles into the Sea of Japan—thereby threatening the whole
of
Japan and South Korea.
The link between Wilson Liu’s counterfeit bills and North Korea’s
missiles
and nuclear weapons is umbilical. “More than 70 percent of
the missiles’ components are imported from overseas,”
says Syung Je
Park, a director of the Asia Strategy Institute, a think tank
affiliated with South Korea’s military,
whom I met (at his insistence)
at a safe house in London. Park has debriefed more than 1,000 North
Korean defectors,
including Hwang Jang Yop, once the regime’s chief
ideologist and Kim Jong Il’s tutor. North Korea depends on
international
aid just to keep famine at bay. “They need money,” says
Park. “Where else can they get it?” The
answer, he and senior U.S.
officials believe, is by means of organized crime: not only the
production of counterfeit
currency but also the manufacture and export
of counterfeit cigarettes and pharmaceuticals, and the sale of drugs
such
as heroin and crystal methamphetamine.
As noted, at the center of this activity lies Office 39. And a
question that
remains to be answered is whether the Obama
administration will revive the efforts against it that President Bush
declined
to pursue.
It was the South Korean movie star Choe Eun Hee, kidnapped on the
orders of Kim Jong Il in 1978 and forced
to spend nine years making
propaganda films, who first reported after her escape that Kim Jong Il
is a cinéaste, with
a fondness for James Bond movies. Should Kim
decide to produce a homegrown spin-off, his screenwriters might well
find
suitable material in the quadrangular building in the leafy
Central Committee precinct of downtown Pyongyang that houses
Office
39. North Korea remains one of the world’s most opaque countries, and
teasing out details about Office
39 is not easy. Like conventional
non-state Mafias, it enforces a code of silence through violence and
fear. I glimpsed
this firsthand in my jail-cell interview with Liu.
When he spoke of the family he was about to lose through
incarceration,
his despair was palpable, and later, when Judge James
Mahan allowed him to address the court, he broke down entirely. But
when
I asked Liu why he had not made a deal with the prosecutors,
using his inside knowledge to secure a lighter sentence, his
reply
revealed a very different emotion: simple terror. “The North Koreans
are my friends,” he said. “I
have a good connection with them. I can
make money easily with them. But you can’t betray them.”
How did
you find out about this article? [Office 39]
Vanityfair.com homepage
Directed from the magazine
Google
Facebook
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From
a friend
Referred from another website
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Polldaddy.com
David Asher, who started watching North Korea
at the Pentagon during
the Clinton era, went on to serve from 2003 through 2005 as head of
the State Department’s
Illicit Activities Initiative, a wide-ranging
investigation into Office 39 and its many-faceted activities. The
program
embraced the Treasury Department, the Drug Enforcement
Administration, the Department of Defense, the Department of Justice,
the
C.I.A., and the F.B.I. “In one sense, Office 39 is like an
investment bank,” says Asher. “It provides
the money for the stuff Kim
needs. Like any organized-crime syndicate, you’ve got a don, and
you’ve got
accountants, and it’s a very complicated business, keeping
track of all this money and making sure the boss gets
paid. But when
members of the organization don’t deliver, they get killed.” According
to Syung Je Park,
Office 39’s elite headquarters staff, which numbers
about 130, plans and supervises foreign operations (often leaving
the
execution to local criminals) and also runs large-scale facilities
such as drug and cigarette factories and the
printing presses that
produce counterfeit banknotes. “Office 39 is central,” says Paul
Janiczek, a former
State Department analyst specializing in North
Korea. “Everything I looked at came back to that entity.” Janiczek
showed
me a State Department chart that illustrates the Byzantine
structures of North Korean power. It identifies the head of
Office 39
as Kim Tong-un, who is said to be a former industrialist. Syung Je
Park says that Office 39, one of whose
jobs is to manage Kim Jong Il’s
multi-billion-dollar personal bank accounts in Switzerland and other
private banking
havens around the world, works closely with other
sections, such as Office 99, which raises funds by selling the
missiles
and other weapons whose development Office 39 makes possible,
and Office 35, which focuses on trying to damage South Korea.
But in
North Korea’s labyrinthine hierarchy, Office 39 is paramount. Park
says, “If Office 99 makes a profit,
it all gets handed over to Office
39.
Office 39
An aerial view of Office 39’s location.
Crime, in
other words, has become an integral part of North Korea’s
economy. “It not only pays,” says Asher, “it
plays to their strategy
of undermining Western interests.” American and South Korean
intelligence officials had
long been aware that North Korea was behind
a great deal of underworld activity: over the years, there have been
at
least 50 documented incidents, many involving the arrest or
detention of North Korean diplomats in a score of countries,
and
linking them to drug trafficking, counterfeit currency, or both. But
just how big these underworld enterprises are
did not become clear
until 2002, when Asher, working with William Newcomb, a senior
economic analyst with the Bureau
of Intelligence and Research, took a
closer look at annually calculated “mirror statistics”—an attempt
to
estimate the regime’s hard-currency resources based on data that its
trading partners provide about their own
imports from and exports to
North Korea. “We knew their economy was in deep trouble,” Asher says.
“What
we couldn’t understand was why they didn’t seem bothered by
sanctions, or want to cut a deal over their nuclear-weapons
program.
They should have been bankrupt, but they seemed to be surviving.”
Asher and Newcomb concluded that,
since 1990, North Korea’s
accumulated legitimate trade deficit was well over $10 billion, and
was increasing by
around $1.2 billion a year. Yet, though the country
had been unable to borrow money on international markets since the
1970s,
it was managing to acquire enough hard currency to import not
only military components but also the goods that fuel the
“palace
economy” of Kim and his cronies. Their lifestyle, dependent on the
importing of cars, cognac, high-end
electronics, and other luxuries,
bears no relation to the impoverished North Korean norm. (In 1991 the
North Korean
government launched a “Let’s eat only two meals a day”
campaign—an injunction the regime’s
leaders did not themselves
follow.) The gap between North Korea’s hard-currency needs and its
means is filled
by Office 39, which is estimated to bring in between
$500 million to $1 billion a year or more.
Compared with the
amount of American currency in circulation around
the world—at least half of all U.S. banknotes are physically in
the
hands of people outside the United States—the total quantity of
supernotes, believed to be made by North Korea,
to date is small.
However, their extraordinary quality can have disproportionate
consequences. In 2004, Taiwan’s
central bank issued a warning that
supernotes had been turning up on the island. This caused a panic, and
the Taiwanese
banks were overwhelmed by customers seeking to return
$100 bills totaling hundreds of millions of dollars, most of them
perfectly
genuine. “It was effectively a run on the dollar,” says
Asher. “No one knew if their money was real or
fake.”
The Secret Service, the branch of the Treasury Department that takes
the lead against counterfeit currency,
has maintained a worldwide
investigation into supernotes since 1989, when the first sample—cruder
than those found
today—was detected by a bank teller in the
Philippines, apparently because it didn’t “feel” right
to the touch.
Since 1996, the U.S. has tried to outwit the supernote manufacturers
by twice changing the design of $100
bills, but the counterfeiters
have kept pace. The supernotes have been found in countries throughout
Asia, Europe, and
the Middle East. Now, as the Liu case suggests,
substantial quantities of supernotes are starting to circulate inside
the
United States.
They are crafted with extraordinary care. Klaus Bender, an authority
on banknote printing, writes
in his book Moneymakers that unlike other
forgeries, and unlike any other currency except real U.S. banknotes,
these
supernotes use paper with long, parallel fibers, manufactured by
a machine called a Fourdrinier and composed of 75 percent
American
cotton and 25 percent linen. Like genuine bills, modern supernotes are
printed using “optically variable
ink,” which appears to change color
from bronze green to black depending on the angle of the light.
(Indeed, their
quality is so superb that Bender suggests they aren’t
made by North Korea at all, but somewhere in America by the
C.I.A.—a
claim for which there is no evidence.)
The print quality is exceptional. Again like genuine dollars,
the
supernotes are produced on a special intaglio press so that their
intricate design is raised above their surface.
The “microprinted”
features, 1/42,000th of an inch high, found on real dollars are
reproduced exactly on
counterfeit ones. At Liu’s trial in Las Vegas,
the prosecution blew up images of the supernotes to hundreds of times
their
normal size, and even then, says an F.B.I. agent who worked on
the case, the differences between the supernotes and genuine
bills
were invisible to the naked eye: “Frankly, if I’d been the defense
attorney, I would have asked the
prosecution, ‘How can you prove these
are counterfeit?’ He could have persuaded the jury they were real.”
Lorelei
Pagano, a Secret Service counterfeit specialist, told a
private banknote-industry conference in 2003 that the makers of
the
supernotes had likely included their few tiny flaws on purpose, so
that they and their customers could tell the
difference between the
counterfeits and the real thing. Otherwise, there would be nothing to
stop criminals from ripping
off their suppliers by purchasing
supernotes—which typically cost around a third of their nominal
value—with
other supernotes.
Wilson Liu’s nemesis is a man named Bob Hamer, a now retired F.B.I.
agent whose recent book
The Last Undercover describes his 26 years
with the bureau, working mostly covertly. Hamer’s three-year
investigation—code-named
Operation Smoking Dragon—began not with
supernotes but with counterfeit cigarettes, which were being shipped
by
freight container from China into California ports by the millions.
These, too, says Asher, originated in North Korea,
and were the
subject of a report by the Coalition of Tobacco Companies, one of
whose investigators made an undercover
visit, posing as a buyer, to
North Korean factories in Pyongyang and the northeastern city of
Rajin. These turn out
fake Western brands, such as Marlboros, in such
quantities that they generate as much as $720 million in gross revenue
each
year. Hamer set up a number of front operations to get inside the
cigarette-smuggling business, and soon had many contacts
who dealt
with him as if he were a smuggler, too. In the spring of 2004, Hamer
and his colleagues were asked by F.B.I.
headquarters to see if they
could acquire North Korean supernotes. One of Hamer’s best customers,
Chao Tung “John”
Wu, who eventually pleaded guilty to smuggling
counterfeit currency, cigarettes, and narcotics, as well as conspiring
to
broker a deal for Chinese-made, shoulder-fired missiles, but died
before he was sentenced, promised he could supply them
with the help
of a man who was a frequent visitor to North Korea—Wilson Liu. The
notes were so good, Wu said at
a secretly recorded meeting, “you can
even go to Las Vegas and slide them into the machines—they take them
right
away.”
Within a few weeks, Wu brought Hamer a sample of an “old” supernote,
but advised him that
before ordering in bulk he should wait for the
forgers to perfect their version of the new, 2003-edition $100 bill.
This
took months, but finally, in March 2005, Wu called Hamer and said
he had two samples, which he eventually handed over at
an undercover
warehouse in Pomona, California. Hamer gave them to a Secret Service
agent and asked him to have them
tested. Hamer remembers, “The guy
called me a few days later and said, ‘Why’d you give me these? They’re
real!’
I said, ‘If these are real and I’m paying 30 cents on the
dollar for them, I’m going to remortgage my
house and spend the
proceeds on these notes.’” Hamer suggested that the Secret Service
send them to the
central lab in Washington, D.C., which confirmed they
were indeed counterfeit.
Retired F.B.I. agent Bob Hamer
Retired
F.B.I. agent Bob Hamer, undercover in search of supernotes.
Wu introduced Hamer to Wilson Liu at the Ritz-Carlton hotel
in
Pasadena. In the meeting, which was videotaped, Liu did not reveal
exactly how he would obtain more supernotes, but
boasted of his
personal connections in North Korea. Wu urged Hamer to go ahead with a
plan to have about a million supernote
dollars shipped to the United
States, saying he would guarantee the shipment, using a house Liu
owned in Beijing as
collateral. Wu also proposed building a
crystal-methamphetamine plant inside North Korea as a means of
penetrating drug-distribution
networks in Asia. “We pushed this scheme
hard,” Hamer recalls, “but the bureau wouldn’t allow us
to invest in
the manufacture of narcotics.”
Using funds generated from other undercover operations, Hamer
wired
$350,000 in two installments to the bank account of one of Liu’s
contacts in Beijing. He made the first
payment on April 6, 2005, and
the next day received a FedEx package containing 15 supernotes and a
computer memory stick
with photos of multiple bundles of
realistic-looking hundred-dollar bills. By the end of the month, a
freight container
laden with rolls of cloth was on its way to America,
addressed to the Pomona warehouse. Among the bolts, Liu promised
Hamer,
would be supernotes with a nominal value of $700,000. He was as
good as his word.
After further clandestine meetings
and payments, Hamer went on to
receive another $223,600. He held a final meeting with Liu at the
Ritz-Carlton on August
17. Liu was late because he’d been delayed
driving back from a trip to Vegas, telling Hamer he had become such a
high
roller that some of the Strip’s biggest casinos—the Mirage, the
Mandalay Bay, and Caesars Palace—had
awarded him “comp” status,
entitling him to free food and lodging. He showed Hamer the bill of
lading for
another, pending container shipment. When it arrived, about
a week later, the roll of cloth hid $983,500 in supernotes.
By
then, Wu, Liu, and some of the cigarette smugglers were behind
bars. Hamer had assembled the key players in Los Angeles
for a
fictitious “divorce party” at the Playboy Mansion that Hamer concocted
for himself. Almost simultaneously,
another F.B.I. operation, called
Royal Charm, rolled up North Korean cigarette-and-supernote smugglers
on the East Coast.
(The suspects had all been invited to a “wedding”
aboard an Atlantic City yacht.) Though under indictment,
Liu managed
to make bail and, while awaiting trial, continued to spend counterfeit
bills in Vegas for close to another
two years. He was caught a second
time when the Secret Service, after receiving intelligence that
supernotes were pouring
into the casinos, installed sensitive
detection equipment in the slots at Caesars Palace. Exactly how much
Liu had managed
to launder by this time remains unknown, but his MGM
player’s-card account reveals that, in the MGM Mirage slots
alone, he
wagered more than $1.2 million in 2005, $1.8 million in 2006, and
$574,000 in the first six months of 2007.
From February 2006 until his
second arrest, on July 30 the following year, he fed almost $2 million
into the slots at
Caesars Palace. Casino surveillance cameras
eventually revealed his laundering technique. Again and again, Liu
would
appear to dispose of about a thousand supernote dollars, but
would pull the lever to place a bet only a few times—so
leaving a
large unspent balance. Then he would press a button to get a ticket
for the unspent amount and exchange it
at the cashier for genuine
dollars.
At Liu’s sentencing, last March, Assistant U.S. Attorney Tim Vasquez
called
the North Korean supernotes “a serious assault on the monetary
system of the United States.” How significant
might this assault be?
For many years, U.S. agencies have claimed in public that the quantity
of supernotes in worldwide
circulation amounts to only about $50
million. By definition, any figure, especially one relating to
forgeries of high
quality, must be a guess. David Asher, in
congressional testimony in 2006, suggested that the total might be in
the
hundreds of millions. But according to Syung Je Park, in 2007
North Korea bought a huge amount of the special Fourdrinier
paper—“enough
to print $2 billion.”
In his State of the Union address in January 2002, President Bush
famously described
North Korea as part of an “axis of evil,” together
with Iraq and Iran. That stern rhetoric underpinned the
efforts of the
Illicit Activities Initiative. Aside from Smoking Dragon and Royal
Charm, the initiative scored some
notable successes. Some of them
involved drugs. In response to U.S.-generated intelligence, the
Australian Navy in 2003
boarded and seized the Pong Su, a North Korean
vessel that had been carrying 150 kilograms of pure heroin. North
Korea
has been heavily involved in drug trafficking, both to its
neighbors and farther afield, for many years. In 2003, U.S.
defense
officials said it had become the world’s third largest producer of
opium, after Afghanistan and Burma.
Unclassified Pentagon documents
say this is converted to heroin at state-owned factories. China’s
narcotics-control
commission described North Korea as one of three
“golden routes” for heroin supply, using a Chinese
term—“Ku’mdallae”—which
had a deliberate double meaning: the Chinese
character “Ku’m” is also that used to represent the name
Kim Jong Il.
Office 39 also organizes the import of ephedrine, the main precursor
chemical for making crystal methamphetamine,
and the manufacture and
export of the drug. Japanese police believe a high percentage of the
meth sold on Japanese streets
comes from North Korea. As Syung Je Park
observes, “drug money and counterfeit money go to Office 39. Office
39’s
money is directly controlled by Kim Jong Il. And Kim Jong Il’s
first priority is to develop nuclear weapons and missiles.”
The
Illicit Activities Initiative also went after banks. In June 2004,
American pressure persuaded the government of Austria
to shut down the
Golden Star Bank in Vienna. Wholly owned by North Korea, Golden Star
was suspected by Austrian intelligence
of sponsoring the distribution
of supernotes and also of attempting to buy fissionable material.
Then, in September
2005, a month after the arrest of Wilson Liu and
his associates in Los Angeles, the U.S. Treasury designated North
Korea’s
most important financial entrepôt, the Banco Delta Asia, in
Macao, as an institution of “primary money-laundering
concern,” in
part because it was being used to distribute supernotes. The
designation amounted to an American
declaration that any entity that
did business with the bank would itself be considered a pariah. “The
Banco Delta
was critically important to the regime,” says Juan Zarate,
the senior official behind the Treasury Department’s
action. (Zarate
later became Bush’s deputy national-security adviser.) “Designating it
compelled other institutions,
especially Chinese ones, to realize that
they risked jeopardizing their own business relationships with the
U.S.”
That, in turn, “gummed up North Korea’s ability to operate in
the normal financial world—for example,
to issue letters of credit in
dollars to pay for what they were doing,” including arranging payment
for parts
for new missiles.
The Illicit Activities Initiative had a lot more planned. The final
stage, which David Asher says
President Bush had been fully briefed
about, would have been the unsealing of criminal indictments. “We
could
have gone after the foreign personal bank accounts of the
leadership because we could prove they were kingpins,”
Asher says. “We
were going to indict the ultimate perpetrators of a global criminal
network.” “The
world wanted evidence that North Korea is a criminal
state, not a lot of hoo-ha,” says Suzanne Hayden, a former senior
prosecutor
at the Department of Justice who ran its part of the
Illicit Activities Initiative. “The criminal cases would have
provided
the evidence. It would have been in the indictments. As with any
money-laundering investigation, we would have
identified the players
and traced them back, from Macao to those who were behind it in North
Korea.” Hayden spent
several years attached to the International
Criminal Tribunal for the former Yugoslavia, working on the case
against
the Serb leader Slobodan Milošević and his financial
criminality. She sees close parallels between his activities
and Kim
Jong Il’s: “The most difficult thing is connecting evidence of
criminality to a state’s leader,
because there is so much deniability
built in. But there isn’t a whole lot of activity in North Korea that
isn’t
sanctioned by the leadership, and the evidence we had already
built up was very good. These cases were very doable.”
The criminal
cases, says Asher, were based on information from undercover agents,
informants, and a vast surveillance
operation. At the initiative’s
outset, in June 2003, says Asher, his boss, former secretary of state
Colin Powell,
directed them “to use law enforcement, not intelligence,
to prove beyond a doubt what they were doing,” noting,
“I don’t want
this to be like Iraq’s W.M.D.”—a lot of heated rhetoric with no
smoking
gun. The result, Asher says, was that “this was not an
emperor-with-no-clothes scenario. We had video. We had audio.
North
Korean generals meeting with Chinese criminals, and with Secret
Service and F.B.I. agents.”
Supernotes
found in Liu’s car (below) at the time of his second
arrest, July 30, 2007.
Instead, the Bush administration
suddenly decided not to proceed. What
Asher describes as the “ultimate non-aggressive containment strategy”
was
unexpectedly curtailed. The reason: the administration believed
that it risked provoking a permanent North Korean withdrawal
from
talks on its weapon and missile programs. Hayden says, “Suddenly, the
rules had changed. The diplomatic piece
of this came swooping in, and
the imperative became ‘Let’s get them to the table,’ and that meant
everything
had to be ratcheted down.”
In fact, the program was not just halted but effectively thrown into
reverse. Kim
Jong Il made his continued participation in international
talks contingent on having sanctions lifted, and in March 2007
the
administration unfettered Banco Delta Asia and unfroze North Korean
assets. Banks around the world that had shunned
North Korean companies
were now free to do business again. The North Korean heroin smugglers
caught on the Pong Su were
released and allowed to go home. Illicit
activity was swiftly back to normal. Hayden says, “This is not going
to
go away. They’re not going to stop making supernotes and
counterfeit cigarettes and drugs, because they’re
desperate.” The most
recent supernote seizure to come to court, unnoticed by the American
news media, was in July
2008, when Mei Ling Chen had a parcel of what
purported to be dried seafood mailed from Taiwan to a house she was
visiting
in Sunnyvale, California. Opened in a random search by
Customs at San Francisco airport, it contained supernotes with a
face
value of $380,000. Secret Service agents inserted a tracking device,
resealed the package, and let Chen receive
it. When they arrested her,
they learned she had already spent thousands of counterfeit dollars
carried into the country
a week earlier, on goods from Louis Vuitton,
Footlocker, and other stores. The Secret Service believed that this
may
have been a way to launder the counterfeit money. (A common ploy,
according to an affidavit by senior special agent William
P. Bishop,
is to return goods to stores and pocket a real-money cash refund.)
A statement from the U.S. Attorney’s
office suggests that, in official
circles, the importance of this case goes well beyond a scam against
shopping-mall
retailers: “The investigation into the [supernotes’]
origin and distribution has been a top priority for the
Secret
Service. The Supernote investigation is an ongoing strategic case with
national security implications.”
The investigation has, the statement
adds, “spanned the globe, involving more than 130 countries and
resulting
in more than 200 arrests.” Chen pleaded guilty, and on
January 30, 2009, was sentenced to 33 months.
Earlier
supernote issues have turned up in large amounts in the Middle
East, in places such as the Bekaa Valley, in Lebanon. Syung
Je Park
says that Office 39 is targeting this region again, partly because
counterfeit U.S. currency is less likely
to be detectable outside the
United States. According to Park, Office 39 has recently diversified
into a new field—re-insurance
fraud. In the past year, the North
Korean government’s life-insurance corporation has recouped about $100
million
from European companies for payouts it claims to have made on
life-insurance policies of people killed in unrelated train,
ferry,
and helicopter crashes. Park says the policies were bogus. A London
attorney who contested one of them in the
U.K. High Court agrees:
“Unfortunately, we could not prove it to the court’s satisfaction. In
the end we
had no alternative but to settle.”
With North Korea’s missile and nuclear-weapons tests earlier this
year,
any optimism about Kim’s transient return to the bargaining
table has evaporated. In what looks like a return to
the financial
strategy pursued by the Illicit Activities Initiative, the Obama
administration sponsored a U.N. resolution
that, besides allowing
searches of ships suspected of carrying weapons and components to
North Korea, would also once
again freeze the country’s foreign-held
assets, curbing its ability to do business with the outside world.
Meanwhile,
the cases against the North Korean principals remain
stalled, and the fuller picture they contain about Office 39 and its
networks
remains under wraps. What cannot be in doubt is the scale of
the challenge now confronting President Obama. “The
thing about Kim
Jong Il is that he isn’t some kind of spoilt, tyrannical playboy, but
a very smart Mafia don,”
says Asher. “He knows every trick in the
diplomatic playbook. He is a world-class criminal, and a world-class
dictator.”
David
Rose is a Vanity Fair contributing editor.
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