Online gambling via N. Korea leading to a web of trouble

Sang-Hun Choe

Monday, Jan. 26, 2004 | 9:04 a.m.

SEOUL, South Korea -- Kim Beom-hoon was hailed as a trailblazer when he went into the online gambling business with North Korea. It seemed the perfect way to bridge a 50-year divide and open up one of the world's most isolated countries.

But two years later the South Korean businessman has run afoul of his country's gambling laws, as well as its ambivalence about whether to treat its communist neighbor as friend or foe.

The South Korean government said this month that it plans to revoke Kim's business license and prosecutors are going after 15 South Koreans who have gambled more than 3 million won ($2,560) each.

Kim maintains the real problem is a country that can't make up its mind how to deal with its neighbor -- woo it peacefully into the market economy, or treat investments in North Korea as aid to a dangerous dictatorship.

"This is a case that shows how the two Koreas still cannot trust and understand each other after living 50 years without communications," Kim complains.

"I have spent money and sweat on this project, and I am now a victim of the Unification Ministry's reluctance to open Internet contacts between the two Koreas," he told The Associated Press.

"I am frustrated and sick and tired of this absurd government behavior. If they punish businessmen like me, who is going to do business with North Korea?"

The government says Internet contacts with North Korea are OK, provided they boost "healthy" relations, not gambling.

Back in early 2002, when detente was much in vogue, Kim jumped in with a proposal to the Unification Ministry, which is in charge of relations with North Korea.

His Hoonnet Co., a Seoul-based Internet software developer, would persuade North Korea to lay its first optic-fiber cable from Pyongyang, its capital, to neighboring China.

He would then set up the Pyongyang Korea Lotto Joint Venture Co. with a state-run North Korean company as majority partner to launch Jupae.com, the only North Korean website not devoted to churning out propaganda.

Jupae (from the North Korean word for card game) would invite netizens worldwide to play poker, blackjack and buy cyber-lottery tickets. North Koreans would be excluded, not that more than a handful even have computers or money to wager. Gambling there is punishable by up to a year in a labor camp.

Jupae's customers would collect their winnings on their credit cards or via foreign bank accounts.

The poverty-stricken North Korean regime jumped at the chance of bountiful earnings and chipped in several million dollars to build the fiber-optic link. Kim also set up Pyongyang's first Internet cafe, aimed mostly at foreign visitors but looking to a long-term future of prosperity and computer ownership in North Korea.

In South Korea, which offers its citizens only one casino far from the capital, gamblers flocked to Jupae, but soon attracted the attention of regulators who said it skirts the law. Lawmakers complained that the venture was aiding the enemy at a time when North Korea is challenging the world with its nuclear weapons program.

Claiming Jupae attracts more than $400,000 in wagers every month, mostly from South Koreans, opposition lawmaker Park Won-hong portrayed North Korea as a future "server base for Internet pornography and gambling."

Jupae says only $40,000 is wagered every month, mostly in small bets, of which three-quarters is paid out as winnings.

Other opposition legislators are defending Jupae, and are pushing to relax government curbs on Internet communication with North Korea.

"The Internet," says legislator Cho Woong-kyu, "could become an effective tool to help North Korea open up and reduce misunderstandings between the two Koreas."

The Unification Ministry had licensed the North Korea operation, but last month accused Kim's company of violating its terms, which stipulated "Internet game and software development and service."