South Koreans Were Bribed to Buy California Rice, Suit Alleges

The U.S. Justice Department is investigating allegations that, U.S. rice exporting firms bribed officials of the south Korean government in order to sell large quantities of rice at above-market prices in 1981 and 1982, causing as much as $10 million in overcharges for south Korea and excess profits for the companies.

The charges were made in a lawsuit filed early in March by the Rice Growers Association of California and the Sacramento-based Farmers Rice Cooperative against Pacific International Rice Mills Inc. (PIRMI) and Agroprom S.A. (a Geneva, Switzerland rice trading company which is headed by a former employee of Cargill Inc.'s European affiliate.) The California growers accused PIRMI and Agroprom of using some of the $6 million they allegedly made in excess profits on two large rice sales to the south Korean government to "pay certain individuals" in the Korean rice purchasing agency "for the favor of awarding the contract and/or to subsidize future sales."

Named in the suit is Kim Joo Ho, administrator and chief executive officer of the south Korean Office of Supply (OSROK), which arranges all government imports. Imported foodgrains are sold at subsidized prices in south Korea directly by the government; the country is the fourth largest export market for U.S. agricultural goods.

In testimony before the Cotton, Rice and Sugar subcommittee of the U.S. House of Representatives Agriculture committee on March 11, the California rice growers' attorney, Joseph Alioto, explained his clients suspicions:

"In October 1981, OSROK disclosed that it had purchased 40,000 metric tons of Southern medium grain brown rice at $449.90 per metric ton, a price which was $100 per metric ton over the prevailing market (price). The curious explanation given for the over market price was that the shipment was against an old contract which the supplier had failed to complete during the original delivery period and which, moreover, had been reported to the U.S. Department of Agriculture as having been cancelled... It is a singular event indeed when a buyer rewards a seller with millions of dollars for failing to perform on his original obligation."

Alioto continued, "It appeared that the people of Korea had paid about $4 million more than was necessary on a purchase of rice. ..they didn't want or need... OSROK recently made two more purchases of rice.. .(which) will cost the people of Korea at least an extra $6 million."

PIRMI and Agroprom responded to the California growers' suit with a counter suit, accusing them and Connell Rice and Sugar Co. of Westfield, N.J. - which handles exports for them and exports 70% of the U.S, rice sold to south Korea - of slander and of conspiring to "monopolize the sale of U.S. rice to Korea."

The countersuit mentions Connell's role in the mid-1970's rice scandal involving Korean businessman Tongsun Park. Grover Connell, president of Connell Rice and Sugar, was indicted for lying to a federal grand jury about $600,000 in payments he allegedly made to Park between 1972 and 1975. Park allegedly used the money for illegal lobbying efforts in Washington. Charges against Connell were dropped in 1979 when Park changed his testimony concerning his relationship with Connell.

Members of the House of Representatives have jumped into the current fray, led by California representative Tony Coelho - who received $2,000 in campaign contributions from Grover Connell and his wife last November. After rumors that PIRMI was bribing south Korean officials began to spread in Washington late last year, 122 House members signed a letter to south Korean president Chun Doo Hwan which was circulated by Coelho

"We wish to take this opportunity to call to your personal attention our grave concern over reports of possible improprieties in connection with a recent purchase of U.S. rice by (south) Korea," the letter stated, mentioning the PIRMI sale. Chun ordered an investigation, which is not yet concluded.