S. Korean President Denies Involvement in Deepening Scandal Over Slush Funds : Asia: Predecessor has admitted amassing millions while in office. But current leader says he was not involved.

By SAM JAMESON

Oct. 31, 1995 12 AM PT

TIMES STAFF WRITER

SEOUL — South Korean President Kim Young Sam on Monday denied involvement in a slush-fund scandal that threatens to plunge South Korea’s political world and its economy into deep crisis.

Kim’s immediate predecessor, Roh Tae Woo, admitted last week to amassing a $653-million presidential slush fund, but Roh “never told me about party funds and I myself did not take part in operating the funds,” Kim told a meeting of political leaders.

Kim did not comment directly on accusations that he received some of Roh’s illegal money to finance his 1992 campaign.

Prosecutors said Monday that they will summon both Roh Tae Woo and business associates of the former president for questioning about the fund--Roh within a day or two, said prosecutor Ahn Kang Min. Roh confessed that he built up the fund from business people’s contributions while he was president.

Other prosecutors said business people closely associated with Roh from three of the nation’s conglomerates--Sunkyong, Hanbo and Dong Bang Edible Oil Groups--will be called in. Roh’s children have married into the controlling families of the Sunkyong and Dong Bang concerns, and Hanbo is run by a Roh friend from his native area.

Ahn announced his intention to summon Roh after the ex-president submitted a 10-page explanation of his slush fund. It revised the amount of the funds Roh said he still has from the $222 million he cited Friday in a TV apology to $242 million. He said he had miscalculated.

Prosecutors also announced they had found another false-name bank account belonging to Roh, bringing the total in their investigation of Roh’s hidden funds to $238 million. If interest is included, the sum will exceed $261 million, they said.

Other investigations were being conducted into whether Roh owns a downtown Seoul building valued at $131 million and seven other properties registered under suspicious names.

In his statement to the prosecutors, Roh listed the names of business firms from which he received contributions, but he did not identify the executives or the dates on which they handed over the money. Ahn said prosecutors will question Roh about how the slush fund was established and how it was used.

Roh offered no details, either in the statement or in his tearful TV apology last week, of how he disbursed money from the fund. But it was so huge that analysts said few politicians in either the ruling or opposition camp would be able to assert that they did not receive any of the illicit cash.

“If you discredit all politicians and businessmen, the only ones left would be the military and the political radicals--people so far out they couldn’t get any bribes,” said one experienced Western analyst, who asked not to be named.

“A continued festering of this issue would be ruinous to politics and the economy,” the analyst said. “That’s why no one wants to see the whole house come tumbling down.”

Roh’s willingness to be the fall guy is the key to these hopes, he added.

How Kim Young Sam emerges from the turmoil is seen as important to the interests of the United States, which has been urging South Korea to reform and open up its heavily regulated markets.

“He is about as reform-minded a leader as you are likely to see around here,” said a Western economist, who also asked to remain anonymous.

Lee Hahn Koo, president of the Daewoo Research Institute, said the investigation of Roh already has upset South Korea’s “business environment,” making it impossible for companies to determine next year’s programs. Should the investigation extend to banks that were established during Roh’s 1988-93 rule, business firms may even find it hard to arrange financing for investments, he said.

“The impact would be very much limited if only Roh were arrested,” Lee said. “But I expect other politicians and businessmen to be arrested.”

The Western analyst said Kim faces the danger of “enormous damage.” “There is no way of stuffing this genie back in the bottle,” he said.

But he predicted that Kim will adopt a strategy of portraying Roh, an ex-general, as a relic of the country’s military-dominated past and will claim that his reforms have opened a new era.

If Kim can succeed in convincing the Korean people that he possesses authentic reform credentials, the president could halt, and perhaps even reverse, a decline in support that he and his ruling party have been suffering, the analyst said.

The slush-fund uproar, the analyst said, represents a “watershed issue” in South Korea, and Kim’s failure to handle it would wipe out his leadership through the rest of his term, which ends in early 1998.

Even as the analyst spoke, Kim began trying to distance himself from Roh.

At a breakfast meeting with his Cabinet, Kim, who was the ruling party’s candidate to succeed Roh, said that even after he merged his opposition followers with those of Roh and another politician into a new ruling party in 1990, Roh’s supporters “tried to do everything they could to kill me politically.”

Roh resigned his ruling party membership and declared he would remain neutral in the election campaign, Kim added.

“He quit the party because he did not want me to become president, and I have not seen him since,” Kim said. He will demand stern punishment for Roh, he said.