CNMI-Korean Connections

December 29, 2008

The CNMI has a vibrant and solid Korean community of about 3,000, and it appears to be continuing to attract both Korean tourists and investors. There are about 200 Korean-owned businesses in the CNMI and a growing number of major investors who contribute to the CNMI economically and culturally. The Korean Community just dedicated a Korean Community Center in San Antonio.

In December 2007, the Marianas Visitors Authority appointed AVIAREPS Marketing Garden to manage the MVA office in Korea. In June, 2008 CNMI Rep. Joseph Reyes questioned the spending of MVA's Korean and Japanese offices. The Saipan Tribune reported:

“I am concerned that your overseas offices may not be generating the returns necessary to justify their operational expenses,” he writes. “With this in mind, I am requesting that you provide me with the name and location of each MVA funded office outside the CNMI, to include contact person, address, phone number, staffing, and annual budget amount.”

MVA managing director Perry Tenorio declined to comment on the letter, saying it is now being reviewed with board members. However, a response is expected soon, he said. Details on how much the MVA spends for its overseas offices were unavailable at press time.
I am not sure the MVA ever released the figures on overseas office expenses. (Perhaps it will be revealed through another Open Government Act request.) Additionally, the Marianas Variety article claims that the MVA does not comply with procurement procedures.

A 2006 Saipan Tribune story states that the MVA formulated a plan to boost tourism appointing new marketing directors and announcing appointments to committees which included "Kwang Joong Kim, general manager of Asiana Airlines for the Korea market." Lines between luring foreign tourists and luring foreign investors to the CNMI are blurred.

Kwang Joong Kim lives with his wife and two children on Saipan. He represents the type of investor that the CNMI needs. In 2007 he was named the Chamber of Commerce's Businessperson of the Year.

In December 2007 MVA Chair Jerry Tan announced, "Asiana Airlines' aggressive foray into the Commonwealth's tourism market-as attested by its planned $100-million investment project at the Laolao Bay Golf Resort-are expected to help MVA return to the 400,000 arrivals plateau."

Likewise, in December 2008 Jerry Tan praised Asiana and Laolao at the MVA's biannual membership meeting. From the Saipan Tribune:
“The impact to the CNMI because of the won is not only on tourism but also on investment, because now it costs a lot more money for Koreans to invest anything into the CNMI,” he said, adding that it now costs Koreans 40 percent more to travel to the CNMI and other locations in the United States.

Tan said the CNMI is lucky that Kumho Asian has invested in the CNMI. The company is building the $60 million Laolao Bay Golf Resort and has increased flights to and from Korea. Kumho also will begin flights from Osaka, Japan, this week.

“So we are very lucky that Kumho Asiana owns Laolao and Kumho Asiana owns Asiana [airlines]. So it's not to their best interest to withdraw air service because they also need to protect their investment here. So we're very thankful and we need to continue to support them.”
The new Laolao Bay Clubhouse was unveiled to fanfare this December. Yet, the LaoLao Bay Development's Gofltel project is not without controversy. Lawmakers and Governor Fitial have been battling over the amount of tax incentives to be awarded to the investor, and recently a lawsuit has been filed over the low rental rate awarded to the developers.

On the unveiling that took place the Saipan Tribune reported:
Fitial also took the opportunity to urge lawmakers to support Kumho Asiana, which after acquiring the sprawling Kagman property in Feb. 28, 2007, has become one of the islands' anchor investors.

“I call on all of our elected officials to renew their commitment to this company, which has committed so much investment capital and flight capacity to the CNMI for so many years, during both bull and bear markets. Few other investors can produce the synergy, value, and integration that this group brings to this project and to the people of the CNMI. Here, with this project and investment commitment, we will have a convergence of unparalleled flight service, exceptional resort accommodations, and world-class recreational golfing opportunities. Given the current global financial climate, now is not the time for our leaders to waiver or be timid in their support for a committed anchor investor,” he said.

Kumho Resort president Bong Ko Kim seconded the governor's call for support of his company and its investment, even quoting from the famed Greek storyteller Aesop.

“We are now in the midst of a global economic phenomenon, with effects reaching far beyond what the world has ever seen before. Now, more than ever, is the time for us to link hands and persevere, most importantly, together. As the great slave from ancient Greece Aesop taught through his fables, 'United we stand, divided we fall,'” he said.
Also this weekend, Asiana Airlines owned by Laolao's parent company Kumho Group of South Korea, launched inaugural flights from Osaka, Japan which are expected to boost tourism. Kwang Joong Kim, regional sales general manager of Asiana Airlines and other Asiana officials were at the airport with Governor Fitial to greet the inaugural flight. The Saipan Tribune reported:
Kim, for his part, said the Osaka-Saipan flights-as well as the other 18 weekly flights Asiana is already servicing the CNMI, plus its Laolao Bay Golf Resort investment-only reaffirms his company's commitment to the islands.

“This is another Asiana service coming to the CNMI. Because of our Laolao Bay investment we inaugurated this flight. We hope we will bring a lot more Japanese tourists from Osaka. I'm very happy to have almost 95 percent load factor in the inaugural flight. We hope we do good,” he said...

...Kumho Resort president Boong Koo Kim, meanwhile, said the onus is on them and the CNMI to continue to promote the service as well as the rest of the 18 Asiana flights to Saipan.

“We are happy about the inaugural flight and we need to continue to promote this service. We hope to get 70 percent seat occupancy in the service. The Laolao Development project is connected with our Asiana flights. Without the project we will not have that much services,” he said.
The bright weekend celebration has at least one dark cloud. In November 2008, it was announced that four CNMI residents are suing Governor Fitial, the Department of Public Land, and the Secretary of the Department of Public Land, John del Rosario over what is called the "unreasonable low rental rate" for public land at LaoLao Bay. Ramon M. San Nicolas, Vicente C. Aldan, Tarsicio Olopai, and Juan M. Deleon Guerrero claim that the CNMI will lose $16.6 million for the 40 year term of the lease to Kumho Asiana. The Saipan Tribune reported:
The plaintiffs through counsel Edward Manibusan, challenged the legality of the lease, saying its terms are not commercially reasonable, contrary to the public interest, and are in violation of Article 11 of the CNMI Constitution.

Manibusan said the lease agreement departs from the standard lease in several respects.

First, Manibusan said, the lease does not contain any public benefit obligations characterizing most, if not all, other CNMI public lands leases for golf courses and resorts.

Second, he said, while Fitial has made much of the magnitude of the lessee's investment in the CNMI, the lease is devoid of any concrete and definite obligations binding this lessee to make any such investment.

Third, he said, there is no public access guarantee, nor is there any junior golf programs or fundraising programs required of the lessee.

Fourth, Manibusan pointed out, the lease does not require the lessee to continue programs for students of Kagman High School, Junior Golf, and outreach programs to the local community.

Fifth, he said, no provision in the lease agreement requires the lessee to invest any definite amount in the construction of the facilities.

“The lessee has been further afforded certain preferential tax treatment by the government, further reducing the actual investment resources into the Commonwealth,” he said.

Manibusan said well after the lease had been consummated, Fitial approved a plan to provide up to $18 million in tax relief for the lessee.

“Fitial continued to pressure the Commonwealth Development Authority for additional financial concessions, in order to add even more benefits under the qualifying certificate program for the lessee,” he said.
The lawsuit raises several questions. Are foreign investors who have close relationships with government officials given special deals? Are there uniform guidelines for awarding incentives?

Of course, the lawsuit is disappointing news to president of LaoLao Bay resort, Yum Kim. From the Marianas Variety:
Yum Kim, president of Laolao Bay Golf Resort, said the lawsuit won’t discourage them from pursuing their $68.8 million golftel project.

“The lawsuit is not good news to us. We are sort of [disappointed] about it. But we’re going to stay on with our project,” he told Variety.

“I’d like to assure the people of the CNMI that we are still moving ahead with the project,” he added.
Fitial's Korean trips go back to 2005 when he took a trip with Lt. Governor-elect Tim Villagomez to Japan, South Korea, Hong Kong, and the Philippines, reportedly, on their own dime to seek investors.

In June 2006 Governor Fitial took another trip to Korea. This time to meet with "big guns" according to the Saipan Tribune:
The governor said he would be meeting with the “big guns” of large Korean companies such as the Asiana Group, World Corp., and Jeju Air, as well as representatives of an agriculture association who visited Saipan in April.

The delegation that will travel with Fitial includes Marianas Visitors Authority board chairman Jerry Tan, vice chairwoman Marian Aldan-Pierce, and board member B.K. Park. Lands and Natural Resources Secretary Ignacio Dela Cruz and agriculture director Donald Flores will also be on the trip.

Each of the delegates, including the governor, will pay for his own way.
An April 2007 Saipan Tribune article details Fitial's meetings in Seoul, Korea:
Fitial went to Seoul at the invitation of Kumho Asiana Group chairman and CEO Sam Koo Park, whom he met on Monday. While in Seoul, he also met vice chairman C.B. Park and Joo-an Kang, president and chief operating officer of Asiana Airlines.

During the meeting, chairman Park thanked Fitial for supporting the group in acquiring the Laolao Bay Golf Resort on Saipan in February. The recent acquisition of the golf resort by Kumho Asiana, the parent company of Asiana Airlines, is one of the largest investments in the CNMI in recent years.

Kumho Asiana, the seventh largest family-run conglomerate in South Korea, has more than two dozen subsidiaries in such industries such as automotive, construction, leisure, logistics, real estate development, chemicals, and airlines. The company was established in 1946 and is based in Sinmunro Jongro-gu, Seoul, Korea.
In May Governor Fitial held a proclamation signing ceremony in his office and declared May 27, 2007 as Kumho Asiana Day:
“At a time when the CNMI's tourism industry faces challenges, especially the loss of airline seats from other markets, it is commendable to recognize Kumho Asiana for its continued commitment to the CNMI market. We value Kumho Asiana's confidence in the CNMI as a premier tourist destination,” he said.

The proclamation signing ceremony was held yesterday morning at the Governor's Conference Room on Capital Hill. Among those present were Lt. Gov. Timothy P. Villagomez, Asiana Saipan general manager Kwang Joong Kim, Laolao Bay president Sun Don Jhung, acting Marianas Visitors Authority chair Marian Aldan Pierce and other MVA officials, and Cabinet members.
In October 2007 Governor Fitial urged agencies to act quickly on permits for the project:
Gov. Benigno R. Fitial urged regulatory agencies yesterday to act quickly on the permit requirements for planned improvements to the Lao Lao Bay Golf Resort.

The governor issued this call while the Legislature delayed a joint hearing on the investor's request for a new 40-year lease of the Kagman property where the golf facility is located. The public land has an area of 161 hectares.

The Senate and House of Representatives initially planned to conduct the hearing today. But it was postponed, as the Department of Public Lands is not done with the publication stage of the lease process.
In November 2007, Saipan Tribune reported:
Under the proposed lease, Kumho Asiana will pay rent of $103,002 a year for the 161-hectare property in Kagman, where the golf course is situated. This is a significant reduction from the current rent amount of $384,000 a year.
Kumho Asiana's plans include a $100-million resort development with two 12-story buildings with 128 condominiums, seven luxury villas, and improved golf facilities with courses redesigned to meet world golf championship standards. The company is credited with increasing Korean tourism to the CNMI by expanding air service.

Sen. Maria Pangelinan, Chairwoman of the Senate Committee on Resources, Economic Development, and Programs and the House Committee on Natural Resources pushed for the lease approval saying that the CNMI was suffering hard economic times and should "look beyond the direct rent amount and focus on the overall impact of Kumho Asiana's $100-million investment plan for LaoLao."

The governor and Public Lands Secretary John del Rosario even went to personally witness the Legislature granting the lease in December 2007:
“The CNMI is truly blessed that Kumho Asiana is committed to expanding its investment here. This is the type of investment we need to revive our economy-the type that will help bring more investments,” Gov. Benigno R. Fitial said.

The governor appeared personally to witness the Legislature grant Kumho Asiana's request for a fresh 40-year lease of the Kagman property, where LaoLao Bay Golf Resort is situated. The public property spans 161 hectares.

Public Lands Secretary John S. Del Rosario echoed the governor's optimism.

“This is the very thing we need now, given that the tourism industry is dying. Kumho's investment gave us a shot in the arm,” he said.
In February 2008, former Judge Edward Manibusan requested documents regarding the lease under the Open Government Act:
The documents Manibusan has requested include correspondence between Kumho Asiana and DPL concerning the lease, lease agreements concerning the Lao Lay property, and appraisal reports of the public land. Manibusan also wants to see all financial statements and reports submitted by Kumho Asiana, S.C. Properties, and UMDA in relation to the lease proposal.
In May 2008 Kumho Asiana submitted a revised qualifying certificate to the CDA for tax breaks. The qualifying certificate program was established in 2000 under PL 12-32 in an attempt to lure investors to the CNMI or for existing investors to expand.

In June 2008 Governor Fitial traveled to Korea again. This trip he met with officials from Asiana Group, World Corp., and Jeju Air.

In August 2008, CDA approved a plan to provide up to $18 million in tax relief for the LaoLao Bay Golf Resort's $68.8 million golf hotel project. Kumho Asiana had originally asked for a $27.67 million tax relief package. Governor Fitial approved the $18 million tax break package in October 2008. The Saipan Tribune reported:
The company said it was taking a “big risk” in doing business here considering the bad state of the CNMI economy, and the federal minimum wage and immigration issues.

Laolao’s qualifying certificate is the 13th to be approved by CDA since it implemented the QC program, which aims to bring in new investments to the islands. It was later amended to include existing businesses that have made substantial improvements to their facilities.

The other QC recipients are Sand Castle Saipan, Tinian Dynasty Hotel & Casino, Hard Rock Café, Spring Water Inc., Hyatt Regency, Rota Resort, Tony Roma’s, Dai-ichi Hotel, Saipan World Resort, We Manage Call, and Bridge Capital LL.
(Some of those QC recipients are not even solvent, and some others have had their own controversies.)

The governor and investor pushed to have the current incentive package raised:
Saipan LauLau Development and the governor are now asking CDA to amend the qualifying certificate to increase the incentive cap. In response, CDA has taken steps to amend its regulations and allow for reconsideration of an approved qualifying certificate.
However, in November 2008, CNMI legislators voted to deny more tax breaks to the investor. Rep. Ray N. Yumul introduced a resolution urging the Commonwealth Development Authority to "deny a request to add benefits under the qualifying certificate program to Saipan LaoLao Development." The Saipan Tribune reported:
According to Yumul, Saipan LauLau Development and the governor are now asking CDA to amend the qualifying certificate to increase the incentive cap. In response, CDA has begun efforts to amend its regulations and allow for reconsideration of an approved qualifying certificate.

“We're basically bending over backwards to accommodate [Saipan Laulau Development],” Yumul said in an interview. “As chairman of the House Committee on Ways and Means, I am concerned because all of these tax breaks affect government revenue.”
The Marianas Variety reported that Yumul said, "The governor should not be a part of the negotiating or requesting of contracts between CDA and a QC applicant as the governor grants the final approval of the agreement between CDA and the applicant."

The Saipan Tribune reported:
Fitial also took exception to language in Yumul's resolution urging the governor to keep his hands off of negotiations between CDA and Saipan LauLau Development.

Saipan LauLau Development and the governor are now asking CDA to amend the qualifying certificate to increase the incentive cap. In response, CDA has taken steps to amend its regulations and allow for reconsideration of an approved qualifying certificate.
After Yumul's resolution was introduced, the Saipan Tribune reported that the Laolao Bay officials would be scaling back and the completion date would be pushed back on the project "due to worldwide economic crisis." Kumho Asiana president, Yun Kim said that instead of two 12 story buildings with 128 condominiums there would be 78 units in an 8 story west wing and a 9 story east wing. The seven luxury villas have been reduced to five. The clubhouse renovations have also been modified. Several portions of the golf course will be lengthened to attract professional golfers.

The push to raise the incentive package continues. From a recent Marianas Variety article, Laolao says investment to reach $70M, requests $22M tax breaks:
Kim said the project’s original cost was $54 million, but this reached $70 million after the company made significant changes in the original design.

“That’s why we asked for the modification [of our QC]. Our investment amount is higher than what it was before,” he told Variety.

According to Kim, one major phase of the Laolao project is the completion of the clubhouse.

“This clubhouse alone costs $50 million,” he said, adding that the aluminum panel used for its interior alone cost about $3 million.

Kim said the project includes the construction of villas, the “golftel” tower and golf course.

The company, he added, also made significant changes to the design of the villas.

One of the five villas will be a big guest house on a 500-square-meter land.

“Just for one small villa alone, we’re investing $1 million,” Kim said.

But because of the depreciation of the Korean won, the project’s target completion, which is the end of next year, may be affected, he added.

“We didn’t scale down our investment…we just slowed down the construction because of the depreciation of the Korean won,” Kim said, adding that their company is very much committed in investing in the CNMI.
Construction of the resort is subcontracted to Daewoo Engineering and Construction also owned by the Khumo Asiana Group.

With the present financial crisis in the CNMI, it is doubtful that the legislators will increase the incentive. But certainly the legislature should work to retain and promote foreign investors.

Korean investment seems to be thriving in the CNMI. The Korean-based World Corp., owner of World Resort is one large investor. Yet, several potential investments never materialized. Another Korean investor lured to the CNMI, the KSA Group was scheduled to build a $300-million hotel and villa complex in San Antonio, but it reportedly failed to meet the lease agreement and the Department of Public Lands terminated their lease. In August 2008 the DPL terminated a lease agreement with the Korean-based company, Win DnC that was scheduled to build a resort in Marpi near the Palms Resort. Why did these investors pull out?

This month governor Fitial announced that a $300 million casino is scheduled to be built on Tinian by Korean company, Neo Gold Wings Paradise. Principal shareholders in the corporation include the chairman and president, Myung In Hyun, and Kwi Dong Woo, the Saipan chairman. According to Public Lands Secretary John del Rosario, the project includes a horse racing track, 36-hole golf course, skating rink, park, and 1,000 room hotel and casino.

Another Tinian Korean investment was reported by the Australian Casino Guide:
Marianas Resort Development Corp. (MRDC), plans to build a US$300 million casino on Tinian to be called Matua Bay Resort. MRDC is a Korean firm based on Guam, which is about 30 minutes away by plane from Saipan or Tinian. Matua Bay is expected to build a 1000-room hotel that will feature a golf course and a casino.
The first phase of the doubled phased project will involve the construction of a 500-room hotel and an 18-hole golf course at an estimated cost of US$179 million. The second phase will include the completion of the facility.
Last month it was reported that a Korean investor wanted to build a $60 million 357-room hotel and spa in As Matuis. Additionally, there are many Korean-run tour companies in the CNMI. The South Korean Tour company, Lotte opened an office in Saipan in February 2008. Mode Travel, another South Korean Company opened in January 2006 primarily serving the Tinian Dynasty Hotel.

Some Abramoff-Korea Connections
In July 2006, soon after the governor's June 2006 to Korea, the Fitial announced the opening of the Seoul-based Tour Mall Co. Ltd. office on Saipan by Bong H. Kim, the company's president and CEO. Tour Mall, is also known as Hanwha Tourmall. It began operations in Seoul in 1982 and currently has 40 offices. Who is Hanwha? Hanwha is the conglomerate that funded Abramoff's Korea-US Exchange Council which was set to fund congressional junkets. According to The Washington Post:
For five years beginning in 2001, the Korea-U.S. Exchange Council and the U.S.-Malaysia Exchange Association treated 12 members of Congress and 31 Capitol Hill staffers and their relatives to nearly $500,000 in trips that included stops at U.S. and overseas resorts, records show.

The Korean and Malaysian nonprofits were created in 2001. Alexander Strategy controlled their combined budgets of more than $2.5 million, as well as their checkbooks and operations,, according to people affiliated with the firm at the time. Records show that Alexander Strategy took in $620,000 in fees for its work on the Malaysia account. A Hanwha subsidiary in the United States, Universal Bearings Inc., paid the lobbyists $940,000 for the Korea work.

The nonprofit groups, on the strength of Buckham's GOP connections, sponsored trips for Republican House members DeLay; Doolittle; Ileana Ros-Lehtinen, Ander Crenshaw and Tom Feeney of Florida; John Carter of Texas; Scott Garrett of New Jersey; and Roger Wicker of Mississippi.
Alexander Strategy Group's Edwin Buckham, was the former chief of staff for former Rep Tom Delay (R-TX). Buckham has been accused of serving as Abramoff's money launderer by channeling money for trips and gifts through his non-profit and lobbying firm. In 1996, Buckham set up the U.S. Family Network as a non-profit, and also created the lobbying firm, the Alexander Strategy Group. Both were housed in Washington, DC in a building with Tom Delay's PAC, Americans for a Republican Majority (ARMPAC). The National Republican Congressional Committee donated $500,000 to the U.S. Family Network, and Abramoff's Russian clients raised $1 million according to The Boston Globe.

The Washington Post reported that contributions also came from the Saipan Garment industry:
...half a million dollars was donated to the U.S. Family Network by the owners of textile companies in the Mariana Islands in the Pacific, according to the tax records. The textile owners -- with Abramoff's help -- solicited and received DeLay's public commitment to block legislation that would boost their labor costs, according to Abramoff associates, one of the owners and a DeLay speech in 1997.
Buckham had two politically-connected employees, Julie Doolittle, wife of Rep. John Doolittle (R-CA), and Christina Delay, wife of former Rep. Tom Delay (R-TX). A 2006 Washington Post article stated:
The FBI has questioned witnesses in recent months about Alexander Strategy's use of nonprofits and its hiring of congressional spouses, including Julie Doolittle and Christine DeLay, wife of the former House majority leader.

Alexander Strategy paid Julie Doolittle about $30,000 to do bookkeeping for the Korea nonprofit. Other contracting work by Julie Doolittle, for one of Abramoff's charities, has led investigators in the Abramoff probe to scrutinize John Doolittle's activities, sources have told The Post.
Another 2006 Washington Post article states that Christina Delay earned between $3,200 and $3,400 a month from the U.S. Family Network (USFN).

The USFN was used by Abramoff not only to channel money, but also to channel influence. The Washington Post reported:
One of the first policy issues to be discussed by the group's board, according to its March 1997 minutes, was a "free-market research project" in the Northern Marianas Islands, a U.S. protectorate in the Pacific Ocean.

At the time, Abramoff was under contract with the Marianas government to lobby against congressional legislation to impede the free flow of immigrant labor to the islands from China and elsewhere in Asia, and impose a minimum hourly wage exceeding the island's standard rate of $3.05.
Edwin Buckham and his USFN director traveled to the CNMI in 1997. The paper reports link between Abramoff, Buckham, Willie Tan and Benigno Fitial:
In April 1997, for example, a longtime Tan aide and island politician named Benigno Fitial went to Washington, where he sang "Happy Birthday" to DeLay in the whip's office. He sent Buckham an e-mail after the trip expressing appreciation for his support and recalling Buckham's explanation that one of his roles was to "stop legislation from getting on the floor of the House." Fitial signed the e-mail, "YOUR 'ADOPTED' BROTHER BEN."

Three months earlier, Tan's network of companies had written five checks of $10,000 each to USFN, and Buckham's wife had claimed $10,000 in "commissions" on these checks, according to the group's ledger.

These were just the first of 23 payments by Tan's companies to the group, which eventually totaled $650,000.

Later in 1997, Wendy Buckham claimed another $10,000 in commissions on Tan's checks, and in 1998, the couple's jointly owned consulting firm took another $20,000 in commissions explicitly attributed to the Tan donations, according to the ledger. Many other "commissions" collected by the couple were not linked in the ledgers to a specific donor.
Edwin Buckham took another trip to the CNMI. This time with Michael Scanlon reportedly to twist arms to secure Fitial the House Speakership. The Asian Sentinel reports:
Abramoff saw a chance to restore official patronage after elections in November 1999 weakened the local Republican Party's hold on the legislature. Abramoff allies Edwin Buckham and Michael Scanlon traveled to Saipan the following month to meet with two Republican members of the local House of Representatives. Buckham and Scanlon promised to secure federal funding for projects in the legislators' districts if they would support former Tan employee Benigno Fitial, then a Republican, to be House Speaker. They agreed and allied with a group of Democrats in the House to install Fitial in place of the incumbent Republican Speaker.
Billing records indicate that he CNMI paid Jack Abramoff for meetings he had with Edwin Buckham of the Alexander Strategy group on September 11, 2000, September 15, 2000, and September 22, 2000.

The chair of Hanwha Group, Kim Seung Youn is also controversial, and is considered by some to possess "mobster mentality." He is also the world's 16th richest person. The Asian Times reports:
Kim Seung-youn definitely appeared more sophisticated - and worldly - than his father. He loved to court American conservatives, setting up something called the "Korea-US Exchange Council" with links to the heart of the right-wing Washington establishment. From his soaring glassy headquarters in central Seoul, he sponsored seminars and speeches at the next-door Radisson Seoul Plaza, a Hanwha holding, drawing such influential figures as Edward Feulner, president of the Heritage Foundation, and retired American generals dedicated to preserving the Korean-US alliance.

Hanwha CEO Kim Seung-youn being arrested. Photo from Getty Images.

In May 2007, Kim Seung-youn was arrested in what the press called a "mafia style assault" involving his "thugs" going after some karaoke club workers who had punched his son. Kim was arrested for personally punching bar workers, and he received an 18 month prison sentence. However, he was released in September 2007. The Chou Sun reported:
Hanwha Group chairman Kim Seung-youn went home with his jail sentence suspended 124 days after he was arrested in May for his role in a mafia-style revenge attacks on a group of bar workers who had injured his son in a brawl. The Seoul Central Court suspended the tycoon's 18-month prison sentence for three years in an appeals trial Tuesday. Kim was ordered to perform 200 hours of community service instead. Neither Kim nor the prosecution plans to appeal.

One of the latest plans to attract investors and tourists to Saipan is promoting the CNMI as an edu-tourism destination to learn the English language. Several Korean-owned schools have opened in the CNMI. In May 2007 the MVA and Asiana hosted an English as a Second Language” Officials Study Tour on Saipan. The Saipan Tribune reported:
MVA and Asiana Airlines have invited 15 major English schools and institutions from South Korea to inspect and tour the Saipan schools as well as local hotels and attractions on the island. This effort is being done to promote Saipan as a learning center for the English language and develop the “edu-tourism” concept for the CNMI.
We continue to applaud the promotion of the CNMI by Asiana Airlines,” said MVA managing director Perry Tenorio. “Having the major schools and institutions here from Korea will continue to increase awareness about our islands throughout Korea.”
Asians are encouraged to learn English and what better place than a beautiful tropical island? The idea of edu-tourism appears to be a good one. The Guam Business Journal quoted Kumho Asiana's Saipan general manager, Kwang Joong Kim:
He [Kim] says that the plus side of having his children stay with him on the island is that they have the chance to learn English as a second language. “When they came here, they could not speak English. Now they can speak English very well. Most Korean parents want their children to learn how to speak English. That’s why they send their children abroad. But it costs a lot,” Kim says. “That’s why I am very lucky,” he says. “I was also eager to speak English while I was in Korea. Now, I have a chance here to learn to speak English.”

His children attend Saipan International School.
The Ladera International School of Saipan owned by Korean investor Yong Nam Park, opened in June 2006 as the CNMI's first boarding school.

The California-owned Emmanuel College was established as a nursing school and targets students from Korea, the Philippines and China. Last year at the opening of Emmanuel College Fitial made remarks about the education-tourism industry:
The recent establishment of English language-training schools, nursing schools, and college preparatory schools shows that the CNMI is expanding its education industry and education-tourism industry.
Fitial said the recent establishment of English language-training schools, nursing schools, and college preparatory schools shows that the CNMI is expanding its education industry and education-tourism industry.

“This represents meaningful economic progress for our islands,” he added.

The new nursing college, located at the Koreana Hotel in Chalan Piao, will blend the Asian and American markets by recruiting and training Asian nursing students who will serve as valuable medical professionals in the United States.

“Through Emmanuel College, we are profiting on powerful demographic changes in America and other industrialized nations with an aging baby boomer population.” Fitial said.
Yet, some controversy is also associated with the foreign owned schools, most of which are not accredited. in 2003, the Korean-owned Saipan University's founder, Park Soon Kyung was arrested by federal agents and charged with inducing interstate and foreign travel to execute a scheme to defraud. The Saipan Tribune reported:
The complaint alleged that Park lured approximately 88 persons from China to enroll at his university through false representations and promises about the education and facilities at SU and the students' ability to obtain work in the CNMI.

FBI special agent Douglas E. Small said he inspected contracts between the students and SU, which was represented by Park. The contracts guaranteed that the students would earn between $600 to $1,500 monthly while attending the university.
In 2005 Park was sentenced to nine years in prison. Chinese students who were defrauded by the scheme, claimed that the CNMI government was also at fault for issuing the university a license.

Another Korean-owned institute, American Mediscience University, was involved in a controversy when Jason Fitial alleged that the school was issuing fake licenses. From the Saipan Tribune:
Jason Fitial, who used to work as “consultant” for the American Mediscience University, furnished the local media copies of allegedly fake licenses issued to seven Koreans.

The documents are virtually identical, except for the name of the recipient. They bear the Board of Professional Licensing logo and state that the recipient is authorized to practice electrical engineering in the Commonwealth. The licenses indicate Dec. 14, 2006 as issue date and Aug. 19, 2006 as date of original registration.

In an interview, Fitial said AMU used a real license and altered it by changing the name, with the intent to make money off of the fake document.

“They even got high school students to this illegal act,” said Fitial. “I just want this to stop before it gets worse.”

Fitial said he began working for the university in June 2006 and handled all of the university's licensing and similar transactions-“anything that deals with the government.” His stint at the school ended in February 2007 “because there's no work, period.”

AMU president Sung Kyu Kim, through a translator, denied Fitial's allegations. He said the university had nothing to do with the licenses.

According to Kim, a certain Mr. Ihm did the licenses. Mr. Ihm rents a space at the former Saipan Koresco Hotel, which now houses AMU.
The growth of the edu-tourism industry and investors interested in establishing educational institutes in the CNMI will depend on strict oversight and accreditation of the schools.

Baby Tourism?

Some Koreans aren't just interested in Saipan as a tourist destination or investment opportunity. As I reported in a June 2008 post, Asian newspapers are advertising for expectant mothers to give birth in Saipan so that the baby can get a US passport.

The Marianas Variety reported that a landlord provides housing for the pregnant women who pay $6,000 to an agent in Korea to make arrangements. A landloard in Saipan said he gets $1,500 a month rent and the Korean women pay for their own food and hospital bills. The Variety reported that one of the women delivered her baby in November, and two more Korean women were expected to deliver within weeks.

Two Web sites, and (both now shut down) targeted Korean, Japanese, and Chinese expectant mothers. (I downloaded pages from the Web sites before they shut down. You can view them here.) From a Saipan Tribune article:
The two Web sites were advertising that, for a cost of $15,000 to $40,000, women could come to the CNMI to give birth. Women would stay in the Commonwealth for two to three months before giving birth at the Commonwealth Health Center.

Both Web sites touted the 14th Amendment and birthright citizenship as reasons to have babies in the CNMI.
Another Saipan Tribune story states: lists nine reasons to have a baby with U.S. citizenship. The reasons include: once 21 years of age, children can help their parents gain citizenship; free education for primary and secondary education and low-cost college education; visa-free travel to most countries; and pension and medical insurance.
The idea of promoting the CNMI as a place for expectant mothers to deliver US citizen babies is not new. A 2003 Saipan Tribune article disclosed that a South Korean company called Baby Tour, Inc. made inquiries at CHC about delivery costs for expectant Korean mothers:
Lee said the company intends to send five to seven pregnant women to Saipan every month beginning December. “In financial points, our clients will pay all expenses in cash or credit card. We need more informations [sic] in detail about what kind of medical services will be offered.”

Upon receiving the letter, the CHC immediately referred the matter to the AGO. The AGO then warned the Korean firm that it faces prosecution should it proceed with its plan.

“You are hereby advised that the [AGO] considers your actions and those of your company to be improper and likely in violation of Commonwealth immigration and criminal laws. If your actions continue, we intend to aggressively prosecute you and all who are involved,” Hutton and Wolosz said in a reply-letter to Lee.

“Be further advised that we are extremely troubled by the scheme you described in your letter, and believe that your actions will (and may have already) violate Commonwealth criminal and immigration laws,” the prosecutors said. “Although the Commonwealth generally controls its own immigration, the acts you described may implicate issues of U.S. immigration as well.”

“Entering the Commonwealth for the benefits of giving birth within our borders is repugnant to the Commonwealth's immigration process, constitutes immigration fraud, and will not be tolerated,” they said. “Be advised that if any individual arrives at a Commonwealth port of entry seeking tourist entry and it appears that travel is actually for the purpose of giving birth in the Commonwealth, her entry will be denied.”

These persons would be placed under immigration custody and sent back to her country of origin on the next available flight, the prosecutors said.
It appears that in 2003 the reaction was rather direct, a little nasty, and certainly not welcoming. Foreigners are free to deliver their babies in the United States, and are breaking no laws in doing so. Still some questions arise. Do these businesses pay taxes, and are they licensed? If they are licensed, where are they licensed and by what government or agency?

Korean Nurses
In November 2008 nine Korean nurses reportedly showed up on Saipan hoping to be interns at the Commonwealth Health Center and to learn the English language. The nurses allegedly paid "recruiter" Jay Kim $3, 750.00 each to cover transportation and apartment rental costs while serving as interns at CHC. The only problem is that CHC does not have an internship program. The Korean media has picked up the story according to the Marianas Variety.

The nurses are certified and experienced medical personnel. The Marianas Variety reports:
The nine nurses from South Korea who still expect to work as interns at the Commonwealth Health Center gave up their jobs and spent a lot of money just to be on Saipan, according to the businessman who brought them here.

Jay Kim who brought the nine nurses to CHC on Wednesday, said he is troubled by the Department of Public Health’s statement that it does not have a sanctioned internship program for medical personnel.

He said some of the Korean nurses already have 10 years experience and are here so they could get a chance to work in the U.S.

Kim, in an interview yesterday, said he brought the nine nurses to Saipan so they could work at the local hospital while learning English.

The Korean nurses, he added, have passed NCLEX and were even issued CNMI licenses.

Simon Sin, the publisher of Saipan Times, a Korean newspaper on island, said the Korean nurses are now studying English at the University of Loyola in Susupe.

He said there’s no reason to reject the Korean nurses.

“All they want is experience here and to learn English,” he said.
Hopefully, the nurses will at least be able to learn English, even if they are not able to intern in CHC.

Attracting and maintaining investors
Koreans appear to be genuinely interested in investing and vacationing in the CNM. In fact, some of the condominiums, and time shares being built in Saipan are targeting Koreans. In November 2008, The Saipan Tribune reported that a legislative committee was recommending passing a bill that would lower from 55 years to 35 years the minimum age requirement for foreigners to live in the CNMI:
The bill also increases the required minimum investment to $125,000 for a qualifying property on Saipan and $100,000 on Rota or Tinian. Further, it provides an alternative scheme by which a foreign can qualify for the foreign retiree investment certificate. Under the bill, an alien can stay in the CNMI as a foreign retiree by simply investing $1,500 in monthly lease or rent.

Currently, to qualify for a foreign retiree permit, an alien has to be over 55 years old and invest $100,000 in a residential property on Saipan, or $75,000 on Tinian or Rota.

“[A]llowing foreigners to maintain a residence in the CNMI would generate much needed revenue, especially now during our ailing economy. Foreigners, and their extended families who could be expected to visit, would bring into the Commonwealth much needed foreign capital,” states the bill.

The bill also proposes to allow a holder of a foreign retiree investment certificate to stay in the CNMI for five-year periods. It sets out requirements such as health insurance and other coverage for the medical needs of foreign retirees and their dependents.
I am not sure who retires at age 35, certainly no one I know. It appears that the bill is meant to bring more investors.

To his credit, it appears that Governor Fitial's efforts and connections have brought serious Korean investors to the islands. It's a market that the CNMI should probably work to retain and expand considering recent successes.

In November 2008, the U.S. Department of Homeland Security, announced in their semi-annual regulatory plan that a new visa classification will be created to help foreign investors in the CNMI as they prepare to convert from the local system to the federalized system. This news should be received as a sigh of relief to the CNMI government.

What effort is the CNMI government making in retaining existing investors and attracting new ones? Is there one unified plan between government agencies and the executive and legislative branch? What impact do the restrictive land ownership laws under Article 12 have on investors? Under the land ownership laws foreign investors could lease land and over the years their investments will depreciate rather than appreciate. Wouldn't this be seen as a major obstacle to serious investors?

Only time will tell if there is a Korean exodus of sorts from the CNMI, as there was a Japanese exit with JAL and some foreign investors leaving.


The Saipan Blogger アンジェロ・ビラゴメズ said...

There are also families in Korea that send their kids to Saipan to go to school in the publc school system for free english lessons. The families pay a local Saipan family a base amount and the student gets food, housing, transportation and a free education. I think most of the kids are on tourist visas.

wendy said...

Hi Angelo

Do you know if there is an education visa that the students could use to enter the CNMI?

Anonymous said...

Ben Fitial is a gangster, associates with other gangsters, and the poor islanders in the Marianas are neither educated or sophisticated enough to figure it out or do anything about it.

The people giving declarations in your post above are a perfect example.

Anonymous said...

Maybe the feds should block tourists from Korea along with the Chinese and Russians.

Give Us American Money!

Bring tourists from Guam and the U.S. Mainland. (!)

Anonymous said...

We would be better to allow a visa waiver for the Russains and require visas for Koreans and Chinese.

Anonymous said...

I do not support visa waivers for the Chinese and Russians. It's a matter of national security.

Anonymous said...

National security ? what security are you talking about we don't even have a US military on island.

Saipan is a small town where we make our living by tourism. There are no industry other than tourism.