On A Wing And a Payoff

In 1984 Northrop, the Los Angeles-based defense contractor, turned over $6.25 million to a company that was not a usual supplier. The money, which was ostensibly intended to finance the construction of a hotel in Seoul, went into the Hong Kong bank account of a firm controlled by Park Chong Kyu, a former South Korean general and owner of a Seoul night spot called the Safari Club.

But the hotel was never built, and Congress and the Korean government are investigating another possibility: that the funds amounted to a payoff to Park, who had important political connections in Seoul. Northrop allegedly paid Park, who died of liver cancer in 1985, to arrange for the Korean government to buy the company's proposed F-20 fighter plane. Had Park succeeded, the Wall Street Journal reported last week, he stood to receive $55 million from Northrop. Congress is looking into whether there was a violation of the U.S. Foreign Corrupt Practices Act, which bars payoffs to foreign officials.

If promises were made to Park, they did no good. Northrop canceled its $1.2 billion F-20 program two years ago without having sold a single plane. The fighters, developed with Northrop's own cash instead of the usual Pentagon backing, lost their appeal after the combat-proven F-16s built by General Dynamics became popular with the Israeli air force and European governments. Then two F-20s crashed in 1984 and 1985, and the U.S. Air Force decided not to buy any of the planes, dooming the fighter's future.

Northrop admits paying $6.25 million to Park, who was known as "Pistol" Park because of his fondness for handguns. But the company contends the payment was a legal part of a so-called offset program, which many U.S. firms use to invest in countries that buy their goods. Northrop, claiming it was defrauded, is suing a group of Koreans allegedly involved with Park in the scandal. "We made the investment in good faith," a spokesman says.

Investigators for the House Energy and Commerce Committee are not so sure. In most offset programs, the company making the investment does so in installments, as funds are needed, rather than in the kind of lump sum that Northrop sent. In addition, the committee wonders why Northrop sent the money to a Hong Kong account instead of directly to Seoul.

The latest F-20 revelations come at a bad time for Northrop. The company, long a target of Government probes into bribery charges, is under pressure from the Pentagon to improve the workmanship on its $46 billion Stealth-bomber project and to speed up the delivery of guidance devices for its MX missile. Now Northrop must answer a round of new questions about one of its old mistakes.