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South Korea's leaders insist that the nuclear crisis on the Korean peninsula can be defused by maintaining peaceful dialogue with North Korea's erratic dictator Kim Jong Il. But black clouds fell across the South's "Sunshine Policy" last week. First, a special envoy sent by Seoul to Pyongyang was rebuffed—the Dear Leader, it seems, was too busy touring the nation's fallow farms. Then North Korea, responding to U.S. President George W. Bush's stern State of the Union address, turned its bellicose rhetoric up to 11, calling Bush "a shameless charlatan." The Stalinist country then appeared to put bite in its bark, reportedly moving its nuclear-fuel rods out of storage—a possible step toward producing nuclear weapons.

More startling, perhaps, a government watchdog's report last Thursday indicated that the landmark summit between Kim Jong Il and South Korean President Kim Dae Jung may have been bought and paid for by Seoul. President Kim's crowning achievement—his 2000 Nobel Peace Prize—may thus be tainted by charges of checkbook diplomacy. After a three-month investigation, the Board of Audit and Inspection of Korea declared that, just a week before the summit, $332 million was transferred from the state-run Korea Development Bank into Hyundai Merchant Marine, a subsidiary of the Hyundai conglomerate, which has connections to the North. The business kept $146 million for itself, while $186 million was paid directly to North Korea. President Kim, entering his final month in office, could only offer rationalizations. "The unique circumstances of South and North Korean relations have been demanding me, the head of the state, to make numerous difficult resolutions," he said.

As his opponents see it, Kim's obsession with inter-Korean cooperation has badly backfired. "Hyundai's money not only saved a regime on the verge of economic collapse but also might have been spent for enforcing their WMD [weapons of mass destruction] program," claims opposition Grand National Party lawmaker Eom Ho-sung. Convinced the financial gambit was a collaboration between the National Intelligence Service, the Blue House and the Hyundai Corporation, the party is calling for an independent inquiry. Even President-elect Roh Moo Hyun, who promised in his campaign to keep the "Sunshine Policy" alive, has voiced his support for further investigation. Eager to distance himself from his predecessor, Roh said he would have no qualms about revealing the full truth of the funding after his inauguration on Feb. 25.

All this leaves South Korea's laureate leader as the lamest of lame ducks, tarnished by scandal and failure. His once promising legacy now seems more suited to an epitaph: Money can't buy you love—or peace.

• Bryan Walsh
• Allegations of paying for rapprochement between North and South Korea taint President Kim's greatest achievement