Little proof N. Korea made fake bills

Bush counterfeiting charge against communist state rests on shaky evidence

WASHINGTON -- Two years ago, as he was ratcheting up a campaign to isolate and cripple North Korea's dictatorship financially, President Bush accused the communist regime there of printing phony U.S. currency.

"When someone is counterfeiting our money, we want them to stop doing that. We are aggressively saying to the North Koreans just that -- don't counterfeit our money," Bush said on Jan. 26, 2006.

However, a 10-month McClatchy Newspapers investigation on three continents has found that the evidence to support Bush's charges against North Korea is uncertain at best and that the claims of the North Korean defectors cited in news accounts are dubious and perhaps bogus. One key law enforcement agency, the Swiss federal criminal police, has publicly questioned whether North Korea is even capable of producing "supernotes," counterfeit $100 bills that are nearly perfect except for some practically invisible additions.

Many of the administration's public allegations about North Korean counterfeiting can be traced to North Korea "experts" in South Korea who arranged interviews with North Korean defectors for U.S. and foreign newspapers. The resulting news reports were quoted by members of Congress, researchers and Bush administration officials who were seeking to pressure North Korea.

The defectors' accounts, for example, were cited prominently in a lengthy July 23, 2006, New York Times Magazine story that charged North Korea with producing the sophisticated supernotes.

The McClatchy investigation, however, found reason to question those sources. One major source for several stories, a self-described chemist named Kim Dong-shik, has gone into hiding, and a former roommate, Moon Kook-han, said Kim is a liar out for cash who knew so little about U.S. currency that he didn't know whose image is printed on the $100 bill. (It's Benjamin Franklin.)

The Secret Service, the Federal Reserve Board and the Treasury Department all declined repeated requests for interviews for this story.

Accept it on faith

The first international test of the U.S. charge occurred in July 2006, when at the request of the Bush administration, the international police agency Interpol assembled central bankers, police agencies and banknote industry officials to make the U.S. case against North Korea.

The conference in Lyon, France, followed Interpol's issuance in March 2005 of an orange alert -- at America's request -- calling on member nations to prohibit the sale of banknote equipment, paper or ink to North Korea.

But after calling together more than 60 experts, the Secret Service -- the lead U.S. agency in combating counterfeiting -- never provided any details of the evidence it said it had, instead citing "intelligence" and asking those assembled to accept the administration's claims on faith.

Interpol's secretary general is an American, Ronald K. Noble, a veteran of the Secret Service from 1993 to 1996. He declined to discuss the supernotes in detail because he's sworn to secrecy about classified reports he received in his old job. Noble said the Secret Service made clear it was "not at liberty to share all of the information" to which it had access.

The most definitive reaction came in May 2007 from the Swiss Bundeskriminalpolizei, which is on the lookout for counterfeit currency and has worked closely with U.S. financial authorities in the past. Calling on Washington to present more evidence, the Swiss said they doubted that North Korea was behind the supernotes.

The Swiss police agency's doubts are based in part on the small quantity of supernotes that have been seized since a sharp-eyed banker in the Philippines first discovered them in 1989 -- about $50 million worth, less than it would cost to buy the machinery to make the unique paper and print the notes.