Kevin G. Hall’s Counterfeit Journalism (Updated)
[Update 28 Jan 08: I’m going to keep flogging this story until I’ve corrected the record. A reader (thank you) directs me to this Bloomberg story by none other than Bradley K. Martin and Hideko Takayama. This one is second only to Steven Mihm’s for the quality of its investigative reporting. If you’ve read Martin’s book, you’ll already know that he’s no neocon collapsist, to say the least.
Takayama and Martin interviewed Yoshihide Matsumura, “whose Matsumura Technology Co. supplies counterfeit-detection machinery to Japan’s post offices, banks and law enforcement agencies.” Matsumura extingishes whatever remained of Klaus Bender’s credibility by pointing to a rather significant fact Bender missed:
Some say the North Koreans aren’t capable of producing such high-quality fakes. German author Klaus W. Bender wrote in the Frankfurter Algemeine Zeitung newspaper in January that North Korea’s machinery from Switzerland-based KBA-Giori SA, “is completely antiquated, unsuitable for printing the ‘supernote.”’ Giori machines are used to print real dollars.
Matsumura disagrees. “I know the printing process and I have seen Giori machinery,” he said. “It doesn’t matter that it’s old. Maintenance is what counts.” In Matsumura’s analysis, North Korea’s own notes — which he called far superior in printing technique to yuan notes produced in neighboring China — most likely are made using Giori machinery for about 80 percent of the process. Additional machinery is needed to print the won notes because they are more colorful than U.S. bills, he said. [Hideko Takayama and Bradley K. Martin; emphasis mine]
I might speculate about how Bender got this critical fact wrong. North Korea actually uses three different types of currency. Bender may have gotten his hands on some of the worthless hoi-polloi scrip. Not that careful research tends to be a hallmark of kook conspiracy theorists, or the journalists who try to pass them off as serious news sources.
Martin and Takayama then cite direct and circumstantial evidence linking North Korea to the distribution of supernotes:
Matsumura, whose Tokyo-based company started in the counterfeit-detection business around the time of the 1988 Seoul Olympics, said North Korea’s early efforts were often seized in quantity from diplomats and trade officials. Japanese authorities continued to confiscate counterfeits in shipments from Wonsan, North Korea, until they banned the entrance of North Korean ships late last year.
And this:
Matsumura says the printing techniques and ink used on the most recent fake $100 bills are identical to those used in producing North Korea’s own 100-won bill.
“North Korea has used front companies to purchase ink for currencies,” Matsumura said. “Any country that makes automobile paint can make the ink.” The volume needed for a major print run could be transported in a single large paint can, he said, estimating the cost of producing each fake note at around four U.S. cents.
Matsumura, like Mihm, points to a printing house in Pyongsong as the source of the supernote. So, incidentally does Kim Il Nam, a former North Korean diplomat who relates his experience getting caught passing supernotes (inadvertently, he says). End update.]
[Original post date 14 Jan 08; updated and bumped 25 Jan 08; scroll down]
Kevin G. Hall is a reporter for McClatchey News Service, formerly known as Knight-Ridder, which for many years has been the Dr. Pepper of the wire services. Hall breathlessly reports that he has concluded a “10-month” investigation on “four continents” that has called into question whether North Korea counterfeited U.S. currency. DPRK Forum links to this eight-paragraph one-pager. After reading it, I thought Hall must be holding back his best stuff, so I kept looking.
A few clicks later, I found this more detailed version, and if that’s all there is, I pronounce Kevin G. Hall the single least competent American journalist whose work I have ever read, a man who owes McClatchey ten months of back wages. Hall rests this painstaking piece of work on four main points:
1. The Swiss Federal Police question the story.
2. Hall questions the credibility of the defectors who were sources for previous stories.
3. The U.S. government wouldn’t tell Hall about the details of its investigation.
4. Macau professes its innocence.
It took one nobody blogger a few hours of one day off to moot or refute each of these points. Eventually, Hall accuses the CIA of being behind everything, but doesn’t cite one shred of evidence to support this claim, and in fact never quite musters the sac to make it directly. Let’s take Hall’s points in inverse order.
4. Macau: Supernotes? Us?
Buried deep within Hall’s story is this self-fisking statement:
McClatchy obtained an audit by the international accounting firm Ernst & Young on behalf of the Macau government that indicated only a single case of counterfeit notes was found at Banco Delta Asia. This was in 1994, when the bank found the notes and alerted authorities. And those fakes did not originate in North Korea. [Kevin G. Hall, McClatchey]
Emphasis mine. That’s actually Hall’s best argument, but he doesn’t mention the evidence to the contrary. Hall, whose main argument depends on drawing inferences from what the government wouldn’t tell him, apparently never bothered to look in the Federal Register. Here’s one graf from Treasury’s Final Rule on Banco Delta Asia:
The bank did not conduct due diligence to attempt to verify the source of the unusually large currence deposits made involving these [North Korean] clients…. Despite widely reported counterfeiting concerns, the bank provided a discount as an incentive to a high-risk North Korean-related bulk currency depositor to encourage its continued use of the bank, and continued to accept deposits from that customer even after it had knowledge that another institution had rejected those transactions. [72 Fed. Reg. 12,730, Mar. 19, 2007]
They can’t both be right. So how would Ernst & Young know whether all of the currency that had passed through BDA was legit unless BDA had reported it as counterfeit? If, as Treasury alleges, BDA was turning a blind eye to counterfeiting, how would the Macau authorities know how many supernotes it had passed? And what incentive would Macau have to out them? Let’s remember that BDA was one of Macau’s largest banks, and that its primary shareholder, Stanley Au, was recently a candidate for city executive. Au lost to another shady banker, from which I infer that looking the other way at suspicious transactions is accepted behavior in Macau.
[Update, 25 Jan 08: The new Levin Subcommittee report on North Korea’s scamming of the UN Development program contains new evidence refuting Hall’s reporting. Hall characterizes the Ernst & Young report as vindicating BDA. Either Hall never got his hands on the report or didn’t read the same report the Subcommittee read; either way, his quote is a deceptive parsing of what E&Y actually said.
I can’t find the whole E&Y report myself, but here’s how it characterizes the use of one North Korean account at BDA, held by IFTJ, a front for the North Korean Foreign Trade Bank (FTJ). By North Korea’s own admission, the account was used for the deceptive and surreptitious movement of funds between Pyongyang and its overseas missions, through an account that was supposed to be used for UN funds only:
Once BDA was listed by the Treasury Department, the Macanese Monetary Authority commissioned Ernst & Young to conduct a lengthy review of the bank’s procedures. Ernst & Young found that the bank had poor document control with regard to IFTJ in particular, and a bank employee stated that the bank conducted little review of IFTJ transactions because of its longstanding relationship with the bank. Ernst & Young concluded that FTB and IFTJ remitted millions of Dollars and Euros between their accounts at Banco Delta Asia. Upon reviewing the remittances, Ernst & Young classified the transfers involving FTB and IFTJ at BDA as carrying “the highest risk of money laundering” of the transactions reviewed at the bank. Compounding this risk, BDA did not provide Ernst & Young with any commercial justification or information regarding these transactions. Moreover, Ernst & Young concluded that BDA lacked adequate record keeping, which prevented it from determining both the total value of the remittances and their direction and destination.
All of these accounts were at Banco Delta Asia, which exercised little oversight over its North Korean transactions. And did I mention that some of the cash that North Korea “withdrew” from its BDA accounts while managing the UN’s money turned out to be counterfeit? That’s right:
72. In the course of the audit UNDP staff alleged that the UNDP DPRK country offce had in its possession $3,500 of counterfeit United States currency. UNDP indicated to the Board that “”¦in agreement with US authorities, the supected counterfeit dollars were handed over to the US authorities on 20 March 2007 in New York “¦” The Board did not investigate this matter further as it does not form part of the Board’s mandate.
Too bad. Here is how Ambassador Mark Wallace described the scam in a 2007 letter to the UNDP:
As you are further aware UNDP frequently sponsored international travel for DPRK offcials. In a varety of intances UNDP’s locally hired employees (seconded from the DPRK government), appears to have “withdrawn” counterfeit U.S. currency from UNDP’s account at the DPRK’s Foreign Trade Bank (FTB) for such travel even after UNDP purportedly stopped using U.S. dollars in the DPRK country program in 2002. [Page 121]
That’s certainly strong circumstantial evidence that North Korea was passing counterfeit currency through BDA. It does not say that the counterfeits were supernotes or say where they were manufactured, but it certainly tells us a lot about BDA, North Korea, and counterfeit currency that Kevin Hall chose to leave out of his story. If the Ambassador and the UN whistleblower are relating these facts accurately, this is a direct link between North Korea’s accounts at BDA and counterfeit U.S. currency, in this case, being pawned off on the UN. It would also refute BDA’s defense that it could not have fenced counterfeit money for the North Koreans because HSBC checked its “large” deposits of currency for counterfeits (see comments). End update]
3: The Secret Service won’t tell me its secrets.
If it’s not obvious why the Secret Service might not want to share its intelligence sources and methods with a journalist who wants to print them where you, I, and Kim Jong Il will be able to read about all of them, you may just be one of those people who doesn’t think the government should have any secrets at all. For a certain class of journalist, the power to print a story like this imbues the writer with great extortionate power: give me my exclusive or I’ll write that you’re a bunch of frauds. That may not have been Hall’s intention; other journalists covered this story far better than Hall years ago. But when he intentionally confuses denying him access to evidence with proof of its falsity, the effect is the same.
In the same spirit, Hall goes to a number of other sources — from John Bolton to a disgrunted, like-minded ex-State Department official — and makes much significance of the fact that they hadn’t seen details of the Supernote investigation, either. Here, via the Disgruntled One, is Hall’s best shot:
“I never really saw the intelligence myself to make an independent judgment.
How … inconclusive! What Hall never explains is whether these people should have reviewed this evidence in the course of their duties. As U.N. Ambassador, for example, Bolton’s interest in North Korea was passing two resolutions related to its missiles and nuclear weapons. Not one person who saw, or should have seen, the evidence in detail told Hall that it was bogus.
2: I don’t believe the defectors.
Next, Hall claims that there is reason to question the credibility of defectors who told other reporters and government agencies about the Supernote operation. Hall specifically notes his reasons to question only one, Kim Dong Shik, whom Hall claims disappeared. To discredit Kim, Hall even drags up a financial quarrel between Kim and his roommate, a spurious claim that tells us nothing about how Kim’s accounts compare to other known evidence (but tells us plenty about Hall).
If Kim Dong Shik disappeared from anyone but Hall and his roommate, that’s very understandable. When you say the things about Kim Jong Il that Kim Dong Shik did, you’d damn well better disappear. The Supernote story cost Kim Jong Il a lot of Hennessey and, very nearly, his life. For a porcine little stump of a man, Kim Jong Il has a very long arm, and if you don’t believe me, just read about what happened to Rhee Il-Nam or Choe Deok-Geun not so long ago. Kim Dong Shik’s roommate trouble could also be an example of the difficulty most North Korean defectors have had adjusting to life in South Korea. These are things that should not surprise any journalist with any knowledge of North Korea.
Lastly, Hall finds it significant that Kim Dong Shik couldn’t name Benjamin Franklin. I don’t. Leaving aside the question of how abundant U.S. history majors are in North Korea, what is the possible relevance of this? By coincidence, it was reported today that art historians have finally revealed the name behind history’s most duplicated face. For that matter, I forgot long ago whose face was on the original version of this.
Hall really means for us to presume, as he does, that all defectors are liars, and that the only North Koreans who never lie are in Pyongyang. This is a crude but fashionable prejudice among apologists for odious regimes. And of course, not just one North Korean has survived to link the North Korean regime to supernotes. The Daily NK even sent a correspondent to buy one right from the source.
1: The doubts of the Swiss
The doubts of the Swiss Federal Police are grounded in jarringly bad logic and driven by the most basic of bureaucratic instincts: C.Y.A. Like Hall, the Swiss whine that the Secret Service hasn’t showed them its information; therefore, the Swiss also miscast the absence of evidence as evidence of absence. (Might the evidence be Secret/Noforn? That would explain that.)
The silliest basis for the Swiss conclusion is that the North Koreans — the people who built nuclear bombs from scratch — are simple folk, too quaint and primitive to do something this sophisticated.
Finally, there is the slightly embarrassing matter of where North Korea obtained the key components of its operation. The North Koreans bought their green-to-magenta color-shifting ink from … Switzerland. The expensive intaglio printing presses? Also Swiss. You can imagine plenty of reasons for the Swiss to want to deflect screw-ups on that scale.
[Update, 25 Jan 08: I also contacted David Asher, an expert on North Korea’s illegal activities, to ask him if he had anything to add to this story. Asher has not yet given me permission to quote his response, but I can safely say that nothing he said in any way undermines the allegation that North Korea manufactured the Supernote.]
This is the part where he eats his own head.
In passing, Hall refers to a New York Times article by Stephen Mihm, “No ordinary Counterfeit,” published July 23, 2006. Mihm’s story is exhaustive in its detail of how North Korea set up its counterfeiting operation and tracking the geneology of the supernote. For Hall, mentioning Mihm’s piece is like Paris Hilton posing next to Beyonce Knowles: it just begs unfavorable comparison. Mihm explains how North Korea obtained highly specialized intaglio printing presses and optically variable ink, known as OVI, in an effort to closely mimic the colors used in the genuine Benjamin. Then Hall actually brings up the fact that North Korea doesn’t even use intaglio presses (or, we can infer, color-shifting ink) for its own currency. [See Update of 28 Jan 08; North Korea may actually use this technology for its own currency after all.] So why would North Korea have a legitimate reason to buy such expensive equipment? Remember: this is a country struggling to feed its people nuclear weapons programs. Hall quotes the Swiss ink supplier:
“We ceased all OVI deliveries (to North Korea) in early 2001, and later in the year all security ink supplies.
By inference, then, the North Koreans were ordering OVI before 2001. What on earth for?
Another worthwhile read, from Justin Mitchell and Catherine Jiang, is “Tracking the North Korean Supernote” in the Asia Sentinel (Hat tip to GI Korea).
The only thing missing from Hall’s story is a citation to our guten freund Klaus Bender, the Soft Reich nutter who claims that the CIA is printing the supernotes somewhere in suburban DC. And sure enough: Hall is peddling that one, too. I give the CIA’s spokesman points for his response:
“As a matter of course, we don’t comment on such claims, regardless of how ridiculous they might be,” said CIA spokesman Mark Mansfield. [McClatchey, Kevin Hall]
Neither Bender nor Hall cites a single shred of evidence to support this theory, and the entire basis for it is that, hey, it could possibly happen (and therefore did?). Thanks to Hall story, my wife tells me that Bender’s CIA hallucination has new life on the Korean internet. Why do they hate us? Because unethical journalists like Kevin G. Hall have nothing better to do than make up shit like this.
Like Hall, I haven’t examined the Secret Service files. Like Hall, I don’t have a clearance, a need to know, or the authority to impose economic sanctions or set national policy. There may even be reasons to doubt the supernote story; it’s just that Hall hasn’t given us any. Unlike Hall, blind self-hatred isn’t my default position, and I lack the desperate desire to disbelieve a story that interferes with the particular policy I happen to prefer. Yes, I tend to believe and highlight the worst about North Korea here, but in the parade of North Korean horrors, counterfeiting marches far behind concentration camps, gas chambers, baby killing, dope dealing, abductions, extortion, terrorism, and nuclear proliferation. Still, with North Korea being so prolific a fount of evil, I can’t help but wonder why some would put their professional reputations on quicksand like this to defend their innocence.
Finally, for those of you who’d love nothing more than to believe the CIA burned down the Reichstag, it’s not only the dollar we’re speaking of here. North Korean crewmen periodically get caught in possession of counterfeit yen in Japan. The North Koreans have also been accused of counterfeiting the Thai Baht, the Euro, and least comprehensibly, the Chinese Yuan. That may be why both South Korea and China also believe that North Korea is the maker of the supernote.
I wondering about this story. There seemed to be a lot of problems to the story, and this gives some deeper insight I was looking for, so thanks Joshua. The story seems to be catching fire as well. When I originally posted it, it was hard to find other info especially when I do not know much about it to begin with.
As for the defectors who are supposedly in hiding, maybe it is plausable they did not counterfeit the notes, but in my mind, it does not negate that North Korea may be up to no good. But the other things North Korea has done in the past does not make me doubt one second North Korea could be very well into this practice as well.
Again, I appreciate the insight.
Hall is Shorrock’s mini-me.
Let MTC know they’re putting out garbage; http://www.mctdirect.com/contacts/index.php
All notes handled by BDA were passed to HSBC for checking.
If BDA were passing large amounts of forged notes, HSBC would have picked them up.
HSBC has not reported any forged notes (same conclusion as E&Y report), therefore either:
1 HSBC has knowingly passed forged notes, or
2 There were no large amounts of forged notes
If the former why has action not been taken against HSBC?
Not quite so, dj. I’ll try to put up a complete response later when I have more time, but HSBC did not in fact check all of BDA’s cash, even if you take BDA’s word for it. Also, receiving suspicious cash was just one of many issues with BDA. BDA was just one of many outlets the North Koreans allegedly used to distribute the supernotes. Remember Sean Garland? Smoking Dragon? Or those North Korea diplomats caught with supernotes?
Still, kudos to you for a more substantive criticism in one blog comment than Hall managed to fit into his entire article.
Lieber Klaus, heute gingen meine Gedanken zurück nach Bad Honnef. Da dachte ich auch an Dich und schaute mal ins Internet.
Dich gibt es noch, das ist prima.
Wo habt Ihr Euch niedergelassen, Deine Familie und Du?
Viele Grüße
Marion Reinartz