Office 39, North Korea’s billion-dollar crime syndicate, pays for Kim Jong Il’s missiles and cognac.

By David Rose for TheVelvetRocket.com

Appropriately enough, I met Chen Chiang Liu on Las Vegas Boulevard. But it wasn’t at one of the casinos on the Strip that he loved so well; it was in a different kind of building a few miles to the north—the Lloyd D. George U.S. District Courthouse. Peering through the heavy mesh screen in a holding cell, he was a very unhappy man. Understandably so. It was March 5, 2009, and later that morning, he was due to be sentenced. Liu had been convicted of conspiracy and fraud involving millions of dollars made not by the Bureau of Engraving and Printing but by counterfeiting presses in a foreign country, presumably North Korea. The quality of these “supernote” forgeries is so high that he’d managed to pass enormous quantities through the electronic detection devices with which every Vegas slot machine is supposed to be equipped. The prosecutor was asking the judge to give him close to 25 years, and in the end Liu would receive more than 12.

Liu’s crimes threatened not only the integrity of America’s currency but the very fabric of international peace. They were part of a vast criminal enterprise believed to be controlled by the North Korean state, set up and used to finance its nuclear-weapons and ballistic-missile programs. All of this, intelligence analysts say, is coordinated by a secret agency inside the North Korean government controlled directly by “the Dear Leader,” Kim Jong Il, himself. The agency is known as Office 39. (Given the opacity of anything inside North Korea, experts differ on whether “Office” should be “Bureau” or even “Room”—and they also suspect that the number itself may change.) Until a few years ago, American law enforcement had Office 39 squarely in its sights—probing its networks, disabling its enablers, and gradually shutting off the sources of illegal hard currency. And then, peremptorily, the Bush administration shut this law-enforcement effort down.

Liu, who was born in Taiwan in 1962, uses the first name Wilson. He owed his fate to the trips to Vegas that he and his wife, Min Li, used to make every weekend from their home in San Marino, a wealthy neighborhood of Los Angeles. “My two daughters like the swimming in the pools and all that, so the whole family come to go swimming, shopping, and eating,” Liu said wistfully. “We see the shows, like Celine Dion: oh, her songs touch my heart. And in the evenings, we play the slot machines.”

Before Liu was finally apprehended, at Caesars Palace in July 2007, he used the casinos to launder counterfeit “supernotes” with a nominal value of several millions of dollars. Most of the notes have ended up in general circulation.

On April 4, 2009, 30 days after Liu was sentenced, North Korea launched its new Taepodong-2 long-range ballistic missile, a vehicle that, if successful, may be capable of reaching parts of the United States. The test brought immediate condemnation by the United Nations and many governments. North Korea denounced this reaction as an “unbearable insult” and expelled inspectors from the International Atomic Energy Agency. It had already withdrawn from international talks on its nuclear-weapons program. On May 25, North Korea conducted an underground nuclear-weapon test, the detonation of a device said to be as powerful as the one that destroyed Hiroshima in 1945. Again ignoring international protests, North Korea the next day fired three short-range missiles. On July 4, North Korea was at it again, firing seven missiles into the Sea of Japan—thereby threatening the whole of Japan and South Korea.

The link between Wilson Liu’s counterfeit bills and North Korea’s missiles and nuclear weapons is umbilical. “More than 70 percent of the missiles’ components are imported from overseas,” says Syung Je Park, a director of the Asia Strategy Institute, a think tank affiliated with South Korea’s military, whom I met (at his insistence) at a safe house in London. Park has debriefed more than 1,000 North Korean defectors, including Hwang Jang Yop, once the regime’s chief ideologist and Kim Jong Il’s tutor. North Korea depends on international aid just to keep famine at bay. “They need money,” says Park. “Where else can they get it?” The answer, he and senior U.S. officials believe, is by means of organized crime: not only the production of counterfeit currency but also the manufacture and export of counterfeit cigarettes and pharmaceuticals, and the sale of drugs such as heroin and crystal methamphetamine.

As noted, at the center of this activity lies Office 39. And a question that remains to be answered is whether the Obama administration will revive the efforts against it that President Bush declined to pursue.

It was the South Korean movie star Choe Eun Hee, kidnapped on the orders of Kim Jong Il in 1978 and forced to spend nine years making propaganda films, who first reported after her escape that Kim Jong Il is a cinéaste, with a fondness for James Bond movies. Should Kim decide to produce a homegrown spin-off, his screenwriters might well find suitable material in the quadrangular building in the leafy Central Committee precinct of downtown Pyongyang that houses Office 39. North Korea remains one of the world’s most opaque countries, and teasing out details about Office 39 is not easy. Like conventional non-state Mafias, it enforces a code of silence through violence and fear. I glimpsed this firsthand in my jail-cell interview with Liu. When he spoke of the family he was about to lose through incarceration, his despair was palpable, and later, when Judge James Mahan allowed him to address the court, he broke down entirely. But when I asked Liu why he had not made a deal with the prosecutors, using his inside knowledge to secure a lighter sentence, his reply revealed a very different emotion: simple terror. “The North Koreans are my friends,” he said. “I have a good connection with them. I can make money easily with them. But you can’t betray them.”

David Asher, who started watching North Korea at the Pentagon during the Clinton era, went on to serve from 2003 through 2005 as head of the State Department’s Illicit Activities Initiative, a wide-ranging investigation into Office 39 and its many-faceted activities. The program embraced the Treasury Department, the Drug Enforcement Administration, the Department of Defense, the Department of Justice, the C.I.A., and the F.B.I. “In one sense, Office 39 is like an investment bank,” says Asher. “It provides the money for the stuff Kim needs. Like any organized-crime syndicate, you’ve got a don, and you’ve got accountants, and it’s a very complicated business, keeping track of all this money and making sure the boss gets paid. But when members of the organization don’t deliver, they get killed.” According to Syung Je Park, Office 39’s elite headquarters staff, which numbers about 130, plans and supervises foreign operations (often leaving the execution to local criminals) and also runs large-scale facilities such as drug and cigarette factories and the printing presses that produce counterfeit banknotes. “Office 39 is central,” says Paul Janiczek, a former State Department analyst specializing in North Korea. “Everything I looked at came back to that entity.” Janiczek showed me a State Department chart that illustrates the Byzantine structures of North Korean power. It identifies the head of Office 39 as Kim Tong-un, who is said to be a former industrialist. Syung Je Park says that Office 39, one of whose jobs is to manage Kim Jong Il’s multi-billion-dollar personal bank accounts in Switzerland and other private banking havens around the world, works closely with other sections, such as Office 99, which raises funds by selling the missiles and other weapons whose development Office 39 makes possible, and Office 35, which focuses on trying to damage South Korea. But in North Korea’s labyrinthine hierarchy, Office 39 is paramount. Park says, “If Office 99 makes a profit, it all gets handed over to Office 39.