AMERICANS THROW rice at brides, process it into certain brands of beer and breakfast food and consume mushy quantities in soups. But most Americans are not great rice eaters. Year after year, a mere 17,000 U.S. rice farmers grow far more than the country needs.
This annual discrepancy between the nation's rice productivity and American appetities frequently has colored politics at home and diplomacy abroad. And now it appears that commissions from the sale of surplus rice have traveled full circle back to Capitol Hill - as Korean payments to U.S. politicians - adding one more piece to the growing "Koreagate" puzzle.
It may seem odd that a minor U.S. crop and food such as rice could be seriously implicated in a controversy that has spread across the Pacific Ocean, disrupted relations between Washington and a close ally, sent congressmen scurrying for cover and introduced the public to a cast of shadowy grain merchants and foreign operatives. Yet federal investigators have collected evidence suggesting that large cash payments to a prominent Korean middleman instrucmental in selling surplus U.S. rice went into the Korean slush fund.
Long before these discoveries, the American-Korean rice trade had expanded into a businss grossing tens of millions of dollars annually. Beginning in the mid-1960s, the trade - urged on by the requirements of politics and diplomacy - steadily gained momentum.
The compact but powerful rice lobby in Congress viewed the shipments to Asia as a way of unloading the embarrassing surpluses, thus lessening domestic pressures to pare down the privileges of the rice industry.
On the receiving end, the regime of President Park Chung Hee bought U.S. rice and gladly accepted additional quantities as and through the 23-year-old U.S. Food for Peace program. As Park launched an ambitious economic plan aimed at developing light industry, rice imports were important to his strategy. Adequate food supplies at reasonable prices were essential in keeping Korean wages low enough to make Korean products competitive abroad.
Various U.S. government agencies also had a strong interest in the rice aid program. For it provided help to one of Washington's most loyal allies and occasionally was traded for Korean concessions on other issue. The Small Black Book
HOW MUCH OF THE money generated by this trade might have found its way back into American polities is still under study by investigators in Congress and the Justice Department.
Washington businessman and party-giver Tongsun Park, who received rice commissions and dispensed money to U.S. politicians, is the focal point of their inquiry. Park, now in London, is pictured by some business acquaintances as no more than a glorified middleman - another of the world-traveling lubricators of international commerce in the mold of Saudi Arabia's Adnan Khashoggi.
In the years when he operated in Washington, Park apparently received large sums of money from transactions in oil, shipping and other of his private businesses, as well as frrom rice. But various documents now in the hands of investigators or The Washington Post indicate a link between Park's rice earnings and disbursements to politicians.
Nine congressmen or former congressment already have publicly acknowledged receiving campaign contributions from Park exceeding a total of $15,000. In additions, Louisiana Gov. Edwin W. Edwards, a former Democratic congressman, has acknowledged that his wife received a $10,000 gift from Park after a 1971 government aided sale of Louisiana rice to South Korea. Records obtained by The Washington Post indicate that at least one other legislator also received cash from Park. And a former employee of Park has told a federal grand jury in Washington that Park loaned former Democratic Rep. Cornelius Gallagher of New Jersey $250,000.
A small black ledger found at Park's home after he left the United States last fall shows that Park noted the names of congressmen next to entries of cash disbursements. According to the entries, Park deposited in a bank $33,726 from a rice trading company on Aug. 26, 1970 - the same day he withdrew $10,000 with a handwritten notation of the names of former Reps. Richard T. Hanna (D-Calif.) and WilLiam E. Minshall (R-Ohio). The ledger markings by themselves do not proved that cash was delivered to the persons named, but the Justice Department is known to be using the book for leads.
Government officials have evidence that Park was more than a private businessman operating without any special backing from his government. Intelligence sources say that South Korean president Park agreed in the late 1960s to make him the principal intermediary between U.S. suppliers of rice to Korea and the Korean government. In 1972, the Korean government's supply office in Seoul notified the two major U.S. rice shippers that Park's services as an intermediary were "required."
Park's commissions on U.S. rice sales have been extensively documented by the U.S. Department of Agriculture and the Internal Revenue Service.
Agriculture Department records show that in 1969 Park acted as agent for the California Rice Growers Association, the state's largest rice cooperative, in its sales to Korea of 245,000 tons of Food for Peace rice. (Under Food for Peace, the United States gives governments abroad low-interest credits to buy surplus farm commodities and is repaid over up to 30 years.) The department's records further show that Park's Korean Development Fund, Inc., acted as agent in the sale of another 129,000 tons of Food for Peace rice by the Connell Rice and Sugar Company of Westfield, N.J. In 1970. The same year, Connell paid Park's personal bank account $202,000 in fees.
Government records also portray a vastly expanded role for Park in the rice trade between the two countries after 1970. According to the IRS, Park received nearly $8 million directly or indirectly in fees for assisting in rice sales from 1972 to 1976. The $7,889,051 originated with Connell. Substantial sums were paid into the bank accounts of companies in Washington and Bermuda, and Connell has denied knowing the money went to Park. Cultivating Friends
DURING THIS SAME period, Park was cultivating relationships with a number of key congressional actors in the rice lobby.
Rice has not always had powerful friends on Capitol Hill. It emerged as a lucrative crop in the United States in World War II, after nearly a century in the shadows of American agriculture. English colonist first grew rice along the Carolina coast, but only the regal mansions they built with the proceeds remain from that era. Rice cultivation diminished after the irrigation systems fell into disrepair in the Civil War, and, by the early part of this century, the United States was importing rice from the Phillippines, China and Japan.
But as cotton's glory faded in the South, farmers in Louisiana, Arkansas, Mississippi and Texas began growing more rice. During World War II, the government offered high price supports to stimulate production. After the war ended, the need to feed hungry people in the devasted nations of Asia spread rice production into California. Lured by generous subsidies and an assured Asian market, rice farmers expanded their acreage in the Sacramento Valley.
Since the, U.S. rice farmers have been better off than most. Until 1976, when Congress passed a law allowing any farmer to grow the crop, the government controlled who could plant it, how much they could grow and what price they got for it. Although crop yields increased rapidly after 1950, price supports were maintained at a stable $4 to $5 a 100-pound bag. By the middle of the 1950s, there was toomuch rice, and the government was buying large quantities to support the price. Some rice millers and producers received as much as $400,000 a year in goverment payments.
The generous rice program was costly, but it had the backing of some of the most powerful members of Congress - men such as J. William Fulbright, former chairman of the Senate Foreign Relations Committee, Wilbur Mills, former chairman of the House Ways and Means Committee, and W.R. Poage, former chairman of the House Agriculture Committee. Some of the most powerful men in Congress came from rice growing states. Let Them Have Golf Courses
OF THE 5 MILLION TONS of rice grown in the United States every year, customers must be found abroad for more than 2 million tons that cannot be sold at home. For California groweres, who produce about a million tons a year, the hunt for foreign markets is particularly acute.The medium and premium long grain rice that grows in the South is preferred by domestic table rice packagers, U.S breweries and importers in Europe and Canada. But the rice that grows in California - a short and medium grain variety that becomes gummy when cooked - has a much more specialized clientele in a few Asian countries, Puerto Rico and among minorities in New York City.
When Japan's rice surplus grew in the 1960s, it was California which felt the heat of Japanese competition in those Asian rice markets.
To rice's friends in Congress, Japan's subsidies to its own rice farmers and the resulting surpluses are vexing problems to this day. Sen. Russell B. Long (D-La.) suggested last month at a hearing that the Japanese turn their rice farms into golf courses and use Louisiana rice as a meal of champions.
It was the rice industry's need for foreign markets that engaged its patrons in Congress in American diplomacy. Illustrative of this is the story of how a few California congressman, working closely with the presidentof San Francisco rice mill, battled to keep Japanese rice out of Okinawa from 1968 to 1972.
Until 1972, Okinawa was under the authority of an American military high commissioner. It imported $10 million to $15 million worth of California rice a year.
But in November, 1968, Curtis M. Rocca, president of Pacific International Rice Mills, Inc., of San Francisco, wrote Robert L. Leggett (D-Calif.) that the Japanese were attempting to "dump" rice in Okinawa. He told Leggett it was "essential" to "impress" upon the military that the high commissioner convey his interest in maintaining the flow of rice from the U.S. to Okinawa .."
Leggett enlisted the help of several California colleagues, including the future House Whip, Democratic Rep. John J. McFall. The Californians wrote President Johnson of their concern. In December, Rocca notified McFall that the Okinawan importers had signed to buy all their rice from California.
In 1970, Leggett wrote a blunt memorandum to his files concerning the Japanese threat to the Okinawa rice market: "The continuing military presence of the United States in Okinawa, constituting at least 50 per cent of their G.N.P., should give the United States continuing bargaining power."
Two years later, Okinawa reverted to Japanese control and California quickly lost that market for its rice, despite repeated interventions by Leggett and McFall with the State Department on behalf of Rocca and the California growers. "Starvation Exports"
AMERICAN FOREIGN POLICY requirements in Southeast Asia in the final stages of the Vietnam war relieved some of the glut in the U.S. rice depots in the early 1970s. As Congress placed restrictions on economic and military aid to Vietnam and Cambodia, the Nixon administration diverted nearly three quarters of the Food for Peace program to those two countries in 1973 and 1974.
Over a million tons of taxpayer-financed U.S. rice was shipped to those two Asian countries in those years, and rice was nicknamed "the diplomatic crop" in State Department circles.
The collapse of the American effort in Vietnam was a blow to the U.S. rice industry. But by then, the industry had gained a strong position in an even more lucrative and promising market: South Korea.
On the face of it, South Korea would not seem a likely outlet for large quantities of American rice. The cold grayness of the rugged terrain is frequently broken by dark, emerald rice paddies. But the appearance of a boutiful rice bowl is deceiving. Only a fifth of the county's land is good for growing crops. Rainfall is spotty. Erosion and flooding are a problem because so much land a has been stripped of trees for firewood, and there is a shortage of underground water ofr irrigation.
During the 1930s, Korean exported rice to Japan - but only at the cost of many Koreans going hungry. These were called "starvation exports" because some Koreans lived on wild grass in the weeks before the harvest so that export requirements could be met.
Today, Korean provides a good example of why imports are so critical in developing countries' economies. Rice has always been the foundation of civilazation in Asia. Now it is essential to economic modernization.
Korea's marketing and food distribution system is underdeveloped. Only a third to half of the rice (and less of the barley) enters commercial channels. That means the government has to procure rice from farmers or import it to feed people in the cities. That is why the global rice trade of 7 million tons a year, which is only a fraction of the global grain trade of 150 million tons a year, has a political and economic importance outweighing its size. Rice Lobby Pressures
IN 1965, THESE rice import requirements were negligible. But as the Korean government began to push an industrialization program that brought thousands of people off farms and into urban areas, the need for imported rice increased a million tons - about half of which came from the United States.
The heavy imports sparked a policy debate inside the U.S. government. Some officials of the Agency for International Development felt Korean agriculture was being neglected.A recent book by Paul W. Kuznets, "Economic Growth and Structure in the Republic of Korea," asserts that the heavy food imports (including the U.S. food aid) had a "depressing effect" on the country's own farm production.
However, the AID officials' arguments against the imports were smothered by the counter-arguments of other Washington agencies and by the pressures of the congressional rice lobby to ship more rice.
In October, 1971, President Nixon sent Ambassador David Kennedy to Seoul to offer South Korea a $175 million increase in rice aid in return for Korea's promise voluntarily to restrict its textile exports to the United States. Korean textiles entering the United States were threatening to disrupt the Southern textile industry - and also Nixon's strategy to win the Southern states in the 1972 election. This secret agreement in which rice played a key part did not become known for almost three years.
At the same time, the State Department and Pentagon were pressing for continued heavy Food for Peace shipments as an indirect payment for Korean troops in South Vietnam. The Korean government sold rice and other Food for Peace commodities locally and used the proceeds to defer military expenses. (Congress ordered this use of Food for Peace-generated money for "common defense" purposes stopped as for July 1, 1974.)
The growth of the Korean market was a boon to the commercial rice trade. But it also triggered a battle between the two largest U.S. rice trading companies, a battle that was to have implications in the subsequent scandal in Washington. Learning the Hard Way
TWO COMPANIES dominate the trade in U.S. rice: Connell in Westfield, N.J., and Continental Grain Company in New York, a sprawling multinational merchant company with offices in dozens of countries.
Continental is believed to be the world's largest rice trading enterprise. Its chief trader, Egyptian-born Raphael Totah, is considred one of the most knowledgeable rice merchants in a business of high secrecy and intrigue.
But, since the mid-1960s, Connell often has outmaneuvered Continental in the sale of U.S. rice to Korea.
One apparent reason is the fact that Connell, according to Agriculture Department records was designated as the agent or broker for the California Rice Growers Association for the sale of rice to the Asian markets Connell sold the cooperative's rice in New York City, where it was preferred by the Hispanic minority and used at Chinese restaurants, and also arranged exclusive rights to market the California rice abroad.
Continental learned of this relationship the hard way in 1967, when it contracted to supply 80,000 tons of West Coast rice to Korea at a price below Connell's. Continental had the contract - but Connell, it turned out, had the rice. Continental, unable to purchase rice directly from the California cooperative, was forced to purchase the rice from Connell at a higher price.
In the 1960s, grain trade sources say, Tongsun Park went to both Continental and Connell with promises to help them with rice sales in Korea. Continental hired Park briefly as a consultant but soon dropped him. But, in 1970, a Park company became Connell's agent for Korean Food for Peace business.
According to IRS documents, Park opened a $40,000 bank account in a textile company's name at the American Security and Trust Company in Washington at about the same time that Connelll made a payment of that amount to the Korean textile firm.
From 1968 to 1975, Connell handled almost all of the Food for Peace rice shipments from Califonia to South Korea. In effect, Connell's connection with the California Rice Growers Cooperative enabled it to control the California rice export trade. Parties and Politics
PARK'S EMERGENCE as a middleman in rice sales coincided with the time in the late 1960s when, according to intelligence sources, the Korean was tapped by Seoul to act as an intermediary. Grain trade sources say Park frequently claimed that he had connections to the "Blue House" - the presidential mansion in Seoul - and asserted that he was also allied with Gulf Oil Company.
In Washington, however, friends knew him only as a wealthy businessman and entertainer who was doing well. In 1970, he burst upon the Washington social scene with an opulent life style that included parties attended by top politicians.
His acquaintances in Congress included many legilators from rice states with a demostrated interest in promiting the sale or distribution of U.S. rice abroad.
One friend was former Rep. Richard T. Hanna (R-Calif.), who began making frequent trips to Seoul in the 1960s. Little, if any, rice grew in Hanna's own congressional district, but the chairman of the California delegation, Rep. Chet Holified, sent Hanna to Korea when surpluses began to accumulate. Hanna was on hand in Seoul when the United States negotiated a 270,000-ton Food for Peace rice aid shipment to Korea in 1968. After that, U.S. embassy officials nicknamed Hanna "the California rice salesman."
At some point, Hanna went to private business with Tongsun Park. Hanna had an interest in Park's Pacific Development Corporation, and Park wrote Hanna personal checks totaling $14,000 before the end of 1974. Hanna did not run for reelection that year. Instead, he went to work for a Long Beach, Caluf., firm that trades in vegetables and rice. But Hanna continued to east for parties at the home of his friend Park, whom he called "an Asian Great Gatsby."
Park also was acquainted with the Gulf Coast rice congressmen. Starting in the early 1970s, he was in and out of the Capitol Hill office of one of the most powerful men in Congress, Rep. Otto E. Passman (D-La), chairman of the House appropriations subcommittee that controls the foreign aid bill. Passman, who was defeated for election in hsi district's Democratic primary in 1976, opposed U.S. aid that could be used increase rice production in nations abroad. Explaining his opposition to U.S. funding of a branch of the World Bank which lends development money to poor countries, Passman said last year: "It's not good for the American rice farmer."
But Passman actively lobbied with the Agriculture Department and AID on behalf of stepped-up rice aid to Asian countries. He boasted that he promoted U.S. rice sales for cash as well on his foreign travels - "in apprecaition of what we in the United States have done for countries in the past."
In 1971, Passman, Park and former Rep. Edwin W. Edwards were all in Seoul at the same time when Passman helped arrange the sale of Louisiana's unsold rice surplus to Korea. Edwards, whose home town of Crowley, La., advertises itself as "the rice capital of America," said later that the sale helped him win election as governor in 1972. After that sale, Park showed up in Louisiana and, according to Edwards, presented Edwards' wife with $10,000 in cash.
Passman was instrumental in arranging the U.S. government financing which Korea used to purchase the rice.
In 1972, the year after the sale that aided Edwards' election, Park hosted a banquet for Passman at Seoul's Sejong Hotel. And the following year, Passman wrote a letter to Korean President Park praising Tongsun Park "for what he has been able to accomplish for Korea in recent months in the consummation of rice purchases."
In 1975, when Passman again went to Seoul to promote rice buying, Park was booked into a $150 suite adjoining Passman's in the Hotel Chosun.
Passman confirmed in 1975 that he was also a friend of Grover Connell, president of the New Jersey rice tradding company which used Park as a sales agent in 1970 and from whose company, according to IRS documents, Park indirectly received nearly $8 million through 1975.
On at least two occasions, Passman sought to help Connell. Once was in Indonesia in 1974 when Passman asked the Indonesian government to permit Connell to deliver non-American rice in fulfillment of a private sales contract. At the time, there was a worldwide shortage of rice, and prices were at record levels in the United States.
American rice prices had been pushed up sharply as a result of heavy Food for Peace shipments to South Vietnam and Cambodia, some of which were handled by Connell.
A second occasion was in 1975, when the Agriculture Department disallowed a Connell contract to supply 40,000 tons of California rice to Bangladesh under Food for Peace. Continental and another U.S. grain firm subsequently contracted with Bangladesh to supply 60,000 tons of the needed rice from the Gulf Coast. In that ease, Passman complained to both the Agriculture and State departments about the decision against Connell. Other Links
ANOTHER ASPECT of these linkages was brought up during last year by agents of the Agriculture Department's office of investigation.
The investigators were told that Passman urged Egypt to do business with a shipping concern in which, according to Agriculture Department records, Park and Conell family members each had an interest. The investigators were told that Park had a 30 per cent interest and that Connell's daughters had a 50 per cent interest in the concern. Pan Mediterranean Shipping Corp., which expressed interest in participating in the growing Food for Peace business with Egypt. Pan Mediterranean's nomination to represent Egypt in its food aid business was withdrawn after the Agriculture Department demanded full disclosure of all ownership interests. The results of the inquiry were passed to the Justice Department.
The best witness on many of these matters - Tongsun Park - has not returned to the country since last fall, when The Washington Post began reporting details of the Korean payment activities.
IRS agents seized the 30th Street mansion where Park had entertained and claimed that Park, who had earned large fees from U.S. taxpayer-financed programs, himself owed $4.5 million in unpaid taxes.
The disclosures raised grave questions, not the least of which was whether American policy toward South Korea in recent years may have been influenced by bribes. Should that possibility turn out to be the case, it would represent a dark chapter in the long saga of U.S. rice, the crop which spilled over so surprisingly into the nation's politics and diplomacy. CAPTION: Picture 1, no caption, The Washington Post; Picture 2, Fromer Rep. Hanna: called Tongsun Park "an Asian Great Gatsby; Picture 3, Tongsun Park gave ex-Rep. Edwards' wife $10,000 after Louisiana rice sale. AP; Picture 4, Former Rep. Passman: boasted of promiting U.S. rice sales abroad for cash.