YONGSAN GARRISON, South Korea — The Army and Air Force Exchange Service is reporting a $76,000 merchandise loss for a store victimized by a scam that funneled thousands of cases of liquor through a secret tunnel from an on-base storage container to a coffee shop off base and ultimately the black market.
Inventory of the housing community’s small post exchange taken after the discovery of the tunnel revealed the loss in a store that averages $133,000 in monthly sales, Air Force Master Sgt. Howard Smith, Army and Air Force Exchange Service spokesman in Okinawa, wrote in response to a written Stars and Stripes query.
South Korean customs officers arrested the Hannam Village exchange manager and a South Korean businessman Sept. 2 on charges of violating customs laws. Twenty-eight other people have since been indicted for customs tariff violations related to the scheme.
U.S. Forces Korea is allowed to import duty-free items as long as they do not fall into the hands of unauthorized people. The command uses a ration card system to track major purchases at the post exchange and all purchases at the commissary.
Under the status of forces agreement with South Korea, USFK is required to take measures to prevent black marketing. But the black market has thrived through inventive schemes, fake ID cards and illegal resale.
After the arrests, officials showed media a 60-foot tunnel running from an on-base storage container to a small coffee shop off base. A rolling track system was used to send cases of liquor down the slanted tunnel into the coffee shop, called U-Turn Espresso.
The exit point at the coffee shop was a 4-foot concealed hole in the corner behind that bar.
The scam started simply, with smugglers driving on base, loading booze and driving off. Customs officials said the businessman — identified only by his family name, Lee — spent more than three months digging the tunnel between the coffee shop and an on-base storage container.
At night, Lee would pull a car into the shop’s storefront and load the booze before reselling it to markets and bars around Seoul, officials said. The coffee shop operated normally a few hours a day.
Customs officials are holding 1,334 cases of beer and 117 cases of wine, said Lee Saeng-ki, head of the investigations office of the Seoul Customs Office. The customs office is holding about $40,000 worth of merchandise, Smith wrote, and said the loss would be cut to $36,000 when “we have the merchandise returned to us by customs.”
But Thursday, investigator Lee said: “We have no reason to turn those items back to the base because they were already paid for by the black marketers.” The booze will be sent to the Korean Veterans Welfare and Health Care Cooperation — an organization that supports veterans in South Korea — which auctions the items off for a cut of the money, said Chi Kwang-ho, of the Seoul Customs Office investigations division.
Smith said AAFES couldn’t attribute the $36,000 in missing merchandise to the black market scam, as an investigation is under way. The Army’s Criminal Investigation Command (CID) and Korean customs officials are investigating, Smith wrote.
Over the last two years, the AAFES storage container at Hannam Village was inspected three times, and security personnel noticed no problems, Smith wrote. AAFES said the Post Exchange manager, identified by his family name Song, resigned from the exchange in July before his arrest.
South Korea customs officials estimated that 62,000 cases of beer and liquor moved through the pipeline, netting smugglers about $2 million. AAFES contests the estimate, and Smith wrote, “We all need to be reminded that the numbers quoted are estimates based on alleged confessions. If one does the math, the numbers are grossly overstated.”
Smith wrote AAFES trains its employees on regulations and procedures. The retailer also uses security specialists and electronic surveillance to monitor facilities.
“We empower our managers to operate the stores,” Smith wrote. “Most do a good job. Some however take a dishonest approach. Once we identify, we take action.”
— Choe Song-won contributed to this report.
