A major American rice exporter paid Washington businessman Tongsun Park nearly $8 million over four years in fees for "assisting" its sales of rice to South Korea, according to Internal Revenue Service documents obtained by The Washington Post.
The $7,889,051 was paid to Park between August, 1972 and January, 1976, by Connell Rice and Sugar Co. of Westfield, N.J. At least $1.5 million of that amount was U.S. government money that financed South Korea's purchase of American rice through the Agriculture Department's Food for Peace Program, the IRS figures show.
Grover Connell, president of the Connell firm, denied in a telephone interview yesterday that he knew Park had any connection with the Korean company which received Food for Peace money. Connell refused to discuss the remaining $6.3 million Park apparently received in connection with ordinary commercial rice sales.
Park's accountant, Frank C. Frantz, said in an interview yesterdy that the IRS contends that all the money was funneled from Connell through companies in Korea and elsewhere to bank accounts opened by Park in Bermuda and here in Washington.
Tongsun Park is a key figure in a current Justice Department investigation of South Korean influence buying on Capitol Hill. According to U.S. intelligence sources, the South Korean government planned to use Park's commission from rice sales to finance a stream of benefits - cash, gifts, lavish entertainment - to U.S. congressmen and officials.
The IRS documents provide the first detailed look at the immensity of Park's income from his work as the South Korean government exclusive agent handling rice sales and the circuitous route by which the money was paid to him.
The IRS claims that Park, who has never paid U.S. taxes on his rice commissions, is liable for $4.5 million in taxes on his income from Connell. Frantz said Park will soon petition the U.S. Tax Court disputing that claim, contending he is a non-resident alien who earned the money outside the U.S.
According to Frantz, the IRS made a similar claim in 1972, but finally agreed Park was not liable for about $500,000 in taxes on $1.5 million in income for the years 1969, 1970 and 1971.
"Now they're coming back with the same old arguments, but nothing has changed," Frantz said. "Mr. Park has been very careful about seeing that he would not be liable for U.S taxes."
The Connell firm's dealings with Park date back at least to 1970, when the company paid a $202,000 fee to one of Park's personal bank accounts. The firm's listed sales agent for the Food for Peace transaction was Korean Development Fund, Inc., according to Agriculture Department files.
The department learned later that Tongsun Park was the presidewnt and principal stockholder of Korean Development Fund. Federal regulations prohibit Food for Peace commissions to anyone connected to the importing country.
According to U.S. intelligence reports, South Korean President Park Chung Hee agreed in the late 1960s to make Tongsun Park the principal intermediary between U.S. suppliers of federally financed grain and rice purchases by South Korea.
Tongsun Park agreed in return, according to these reports, to use substantial amounts of money from these commissions to finance entertaining, gifts, and cash for U.S. lawmakers to influence legislation and otherwise create a favorable public image here for the Park Chung Hee regime.
Tongsun Park soon established himself as a rice broker, however, because much of the rice sold to South Korea is federally subsidized under the Food for Peace program, Park had to hide his special relationships with the South Korean government, sources said.
Under the Food for Peace program, set up by Public Law 480, the U.S. government signs an agreement with participating countries, saying it will provide commodities of a certain value. The purchasing country is then given the go-head to buy the commodity from private U.S. suppliers.
The actual purchase money is provided by the Agriculture Department's Commodity Credit Corporation, which gets it from funds appropriated by Congress. The purchasing country then pays the money back over a 41-year period at an extremely low interest rate.
Connell is the largest American exporter of rice under the Food for Peace program and is also one of the largest private corporations in the U.S.
On March 21, 1972, the South Korean agency responsible for all overseas purchasing wrote Connell and other major exporting firms.
"In order to insure more satisfactory transactions for our rice trade, we are pleased to inform you that Mr. Tongsun Park, president and chief executive officer of Miryung Moolsan Company of Seoul, has once again, as in the past, agreed to serve as an intermediary. In fact, his service will be required for all our rice trade with the United States in the future."
According to Connell, his company forwarded a copy of the letter to the Agriculture Department for its reaction. The department checked with the South Korean government and found that the Koreans were, in fact, insisting that all rice sales go through Tongsun Park.
Agriculture Department officials then informed all the involved parties that "Mr. Park's designation (by the buyer) as selling agent contravenes normal commercial practices." They also asked the Korean government to withdraw his name, which it did,
Connell then turned to a major Korean textile firm as its agent because it was "a very prominent Korean firm, reliable. Knowledgeable and it could serve our interests well," Connell said in the interview yesterday.
On Aug. 8, 1972, Connell's firm made a $40,000 payment to the textile firm, Daihan Nongsan. About the same time, according to the IRS documents, Park opened a checking account in the Korean company's name at American Security and Trust Co. in Washington with a $40,000 deposit.
park's accountant Frantz said he assumed his client was an officer of Daihan Nongsan because he had authority to open its accounts in the U.S. and at the Bank of Bermuda.
Connell said he didn't know that Park had any interest in, or connection with Daihan Nongsan Co. Connell said he dealt with Park Yong Hak, the firm's president the Seoul, and dispatched the $1.5 million in commissions to various bank accounts around the world on written instructions from the Korean company.
"We don't care where they get paid," Connell said. "That's the other fellow's business."
Daihan Nongson Co. is known principally as a cotton textile producer. Last year it imported more than $80 million in raw cotton from the U.S. and exported more than $106 million in finished goods. Park Yong Hak is believed to own more than 99 per cent of the firm's stock.
According' to Connell, he did not use Park as a sales agent from 1971 through 1973.
However, Park traveled to Louisiana and Seoul in 1971 with Congressmen Edwin Edwards (D-La.) and Otto Passman (D-La.) to arrange sale of Louisiana rice to Korea. Park and the congressmen successfully sought an unusual $31 million loan to South Korea from the Agency for International Development to finance the purchase for rice during 1971 through 1793.
The 30-year, 3 per cent loan enabled Louisiana farmers to sell their substantial rice surplus and is generally credited with resulting in Edwards' election as Louisiana governor in 1972.
In 1972, Park and California Democratic congressmen John J. McFall and Robert L. Leggett were heavily involved in arranging purchase all of California's surplus rice crop.
According to Agriculture Department sources, Connell Rice and Sugar Co. purchase the majority of Louisiana and California rice crops in 1971 and 1972.
In mid-1972, the Agriculture Department began an investigation of Park's connections with the South Korean government. But investigators were frustrated because Park said his only refused to produce them.
Park also said his rice commissions could not be isolated because they were intermingled with funds he received from other sources including Gulf Oil Corp. Gulf has denied paying Park any fees or having any business connection with him.
Gulf did pay a firm headed by Park's brother, park Kun Suk, substantial fees for chartering oil tankers during the same period.
According to IRS documents provided to Frantz, Park received $585,865 from Connell through Daihan Nongsan in 1972 and $681,850.50 in 1973.
In 1974, according to the IRS, the arrangement changed and Connell "engaged the tazpayer to arrange rice sales directly to Korea, for which he (the taxpayer) would share in the proceeds of each sale."
In 1974, because of a world food crisis, no shipments of rice to South Korea were made under the Food for Peace program, an Agriculture Department officials said yesterday. However, 73,000 tons of rice were sold through straight commercial channels, with no U.S. subsidy.
In 1974, IRS records show, Park received a direct payment of $30,000 from the Connell firm to an account at Riggs National Bank. Park also received payments that year funneled through two other firms, Bowspirit Co. and Three Star Navigation Co.
Until 1974, receipient govenements were allowed to negotiate with American exporters rather than choosing the seller through competitive bids. Connell said he had complained to Agriculture at the time because "we think the influence of the agent has much to do with the success of the transaction."
During that period, however, Connell sold 60 per cent of the rice exports to South Korea under Food for Peace.
When the sytem changed in 1974, Connell said, he stopped paying commissions to sales agents such as Daihan Nongsan. The date of the last payment to Korean textile firm is listed in the IRS documents as July 1, 1974.
At the same time, though, commercial sales of rice without government subsidies grew.
Connell said yesterday that he had appeared before the federal grand jury now investigating charges of Korean influence-buying and had been asked specifically by prosecutors not to discuss his testimony.
Thus there is no clear explanatioj of what services were provided for Connell in 1974 and 1975 by Bowspirit and Three Star.
In August, 1974, according to IRS records, Park received $110,000 in a Bowspirit Co. account at the same bank and, one month later, the Three Star account was wireeived $110,000 in a Bowspirit Co. account at the Bank of Bermuda.
In September, 1974, a $1.4 million payment was wired to a Three Star Navigation Co. account at the same bank and, one month later, the Three Star account was wired another $1.3 million.
Associates of Park say that Three Star is a Park company headquarter in Liberia.
In March 1975, Park's Washington based firm, Pacific Development Co., began receiving regular $10,000 monthly payments from Connell, according to the IRS documents.
Frantz said yesterday that he understood that Pacific Development was being paid for a survey on future rice needs conducted for Connell South Korea.
The IRS claim shows that Park received a total $3.6 million in 1974 and almost $3 million in 1975.