Yes, there is such a Korean word and yes it has nothing whatsoever to do with racisim.
This video is several years old. I remember it caused a huge scandal in the Far East expat community. They were so embarassed for months, especially the (very very) few black people who are there. It was all over Youtube too.
EDIT: it is from 27 August 2011,
"
The foreigner in question is 24 years old, an American, and an English teacher. The victim was 61. This went down around 11:10pm Saturday on the bus from Moran Station to Bundang. One of the bus passengers called 112 (Five-Oh), and the bus driver stopped the bus in front of a nearby police station, where the foreigner was arrested. After completing their preliminary investigation, the police let the alleged ruffian go, but plan to call him in again tomorrow for further investigation."
Source:
http://www.rjkoehler.com/2011/08/29/...little-korean/