An indictment in a bizarre international money laundering scheme was released from the U.S. Attorney’s office in Anchorage today. $1 billion that was being held in Seoul South Korea, was spirited out of the country through a scheme perpetrated by a former Anchorage man. Assistant U.S. attorney Steve Skrocki prosecuted the case.
Skrocki said former Anchorage resident Kenneth Zong, created a scheme to assist several Iranian nationals and banks from Iran into subverting Korean government restrictions on the use of Iranian funds. He spoke with Alaska Public Media’s Lori Townsend:
TOWNSEND: “What was Zong doing?”
SKROCKI: “By creating this false scheme, the Iranian co-conspirators of his directed him to send Iranian held funds that should have stayed in Korea, by Korean law, out to various parts of the world to approximately $1 billion.”
TOWNSEND: “Where, who was the money going to? What was the purpose of these transfers?”
SKROCKI: “The indictment doesn’t list who the money was going to, but the indictment does list approximately 10 foreign countries ranging from Dubai, the United Arab Emirates, Canada, Switzerland, Austria and Germany and those countries and others including the United States is where that $1 billion was transferred out of Korea to those countries and individuals in those countries.”
TOWNSEND: “How did the scheme work?”
SKROCKI: “As listed in the indictment, Mr Zong and his Iranian conspirators developed a false business, where they would falsely order marble from the Middle East and have it shipped through one of Mr Zong’s companies to Iran. They would falsify virtually all of the paperwork in connection with this false purchase and transport submitted to Korean authorities as legitimate and once the Korean authorities reviewed it, not knowing it was not legitimate, they would then issue payment to Mr Zong who then obtained the payment in Iranian money and then directed that money outside of that controlled environment to the worldwide financial market.”
TOWNSEND: “How was Mr. Zong discovered?”
SKROCKI: “Mr Zong’s activities were discovered by the Korean authorities and they were subsequently made available to us after that discovery.”
TOWNSEND: “Is it known how much he made or members of his organization or his family?”Â
The indictment charges that Mr Zong received anywhere from 10 million to 17 million dollars(U.S.) as commission or fees for orchestrating and being the center of this fraud.
TOWNSEND: You mentioned earlier Mr. Skrocki that $1 billion had been laundered. Has that money been recovered?
SKROCKI: “It has not.”
TOWNSEND: “How about the money that was paid to Mr. Zong, the $10-17 million dollars? Has that been recovered?”
SKROCKI: “As charged in the indictment again, the money that made it into Anchorage was approximately close to 10 million dollars and that was spent on personal residences, private property, vehicles, other investments. The majority of those properties and funds have been seized by the government and forfeited by the government last spring and so a substantial amount of that has been recovered.”
TOWNSEND: Is there any reason he was doing this from Alaska?
SKROCKI: “As charged, all of the activity that Mr Zong perpetrated in connection with this crime was all done in Korea, so the Alaska connection was his commission or the fees paid of the $10 million that was transferred from Korea to various banks here in Anchorage and that’s where the Anchorage connection is.”
TOWNSEND: “Is it known what the $1 billion was to be used for?”
SKROCKI: “We don’t have any idea as to what that money went to.”
TOWNSEND: “Will there be more charges against him or others?”
SKROCKI: “That’s not something I can comment on but the investigation is ongoing and has been for several years and we’ve not yet completed it.”
TOWNSEMD: “Mr. Skrocki, is this the largest money laundering scheme the DOJ has ever handled?”
SKROCKI: “I can’t speak for the Department of Justice, I would have to say, probably not but certainly for our office, $1 billion is probably the largest that our office has ever seen.”
TOWNSEND: “There is so much concern about information on the Internet, what’s real and what isn’t. We’ve seen a lot of concern about that, especially recently. What’s learned after a case like this? Does it at all help to strengthen financial controls? Or what kind or what kind of things are learned and applied after you successfully prosecute a case such as this one?”
SKROCKI: “As the indictment states, this case was primarily out of Seoul, South Korea. Once the Korean authorities became aware of the nature of the fraud, they implemented stricter controls with respect to their trade agreement with Iran and how money is transferred back and forth between the two countries because they do have their own sovereign trade agreements. So once they became aware of it, they strengthened their rules. Our rules under the charges that Mr. Zong is facing are very strict, without getting approval from the Office of Foreign Asset Control, American citizens cannot, for the most part, do any kind of business whatsoever with the government of Iran.”
TOWNSNED: “Is it known how the money was spent in Alaska?”
SKROCKI: “The indictment charges that Mr Zong and an unindicted co-conspirator, who’s not listed at this time, conspired to spend the money in Alaska in various different ways, with the purchase of homes, condominium complexes, a Bentley vehicle, a Porsche and other significant money transfers, including 800,000 dollars of the 10 million that came to Alaska was wired back to Mr Zong in South Korea.”
TOWNSEND: “Have those properties been seized?”
SKROCKI: “They have been seized. They were seized in April of 2014. They all have been under a forfeiture proceeding with the United States District Court here and over several months our forfeiture division in the office reached an accommodation with the people who owned the property so most of the property has been seized or disposed of.”
Lori Townsend is the news director and senior host for Alaska Public Media. You can send her news tips and program ideas for Talk of Alaska and Alaska Insight at ltownsend@alaskapublic.org or call 907-550-8452.
