The U.S. official in charge of procurement for the Cambodian refugee relief program was arrested last night in a Washington hotel room while accepting an alleged payoff from a rice seed brokeage firm based in Thailand, according to law enforcement officials.
A four-month investigation by the U.S. Agency for International Development found that George C. Warner, a senior executive with AID stationed in Thailand, allegedly extorted $134,000 in the last five months by threatening to change brokers if he were not paid a kickback of $7 per ton on rice seed, according to the officials.
Warner was arrested in the Georgetown Holiday Inn at 8:15 last nights as FBI agents, Justice Department attorneys and AID officials watched him on a videotape monitor as he accepted $9,000 in $100 bills, according to informed sources.
Lee J. Radek, the deputy chief of the Justice Department's public integrity section, personally supervised the arrest. Radek's presence apparently reflects Justice Department concern that the videotaped transaction be admissible in court as evidence against Warner and does not encounter the same problems as the FBI's controversial Abscam investigation of corruption in Congress.
Warner's activity was first brought to AID's attention by Morton I. Abramowitz, the the U.S. ambassador to Thailand, where the Cambodian refugee relief program is managed, according to State Department sources.
Abramowitz encouraged AID to accelerate its investigation and complete it before Warner returned to his job in Thailand with the assistance program.
Allegations that the Vietnamese army occupying Cambodia has diverted rice and rice seed from refugees and is selling the commodities to starving Cambodian peasants at exorbitant prices have circulated since the program began. This is the first allegation that a U.S. official has been involved in any impropriety regarding the Cambodian relief program.
The funds allegedly diverted by Warner would hasve been sufficient to purchase more than 600 tons of rice seed, yielding enough rice to feed thousands of Cambodian peasants, according to State Department sources. f
The rice seed was being distributed by the U.N. World Food Program in an effort to end the chronic famine caused by 10 years of disruption and war.
Warner was previously the director of the U.S. AID programs in India and Bangladesh. In the fall of 1979, he was transferred to AID in Thailand, where he became part of the Khmer Emergency Group supervising U.S. assistance to refugees. He was then detailed to work with the World Food Program administered by the U.N. Development Program. While with WFP, Warner procured 20,000 tons of rice seed, all purchased with U.S. funds.
According to informed sources, shortly after he took his new position with the WFP, Warner approached Kurt Furrer, a Swiss national who heads Suisindo, the Thai company that purchases the rice seed, packages it and has it transported to distribution centers. Warner reportedly told Furrer that unless Suisindo paid Warner $7 per ton of rice seed, Warner would see to it that Suisindo would lose the brokerage agreement.
Reportedly, Furrer agreed to the arrangement, but because he received only $4.80 per ton for his commission, he arranged for his commission, he arranged for the Thai company actually supplying the rice seed -- E.P.C. Inc., owned by a Chinese-Thai named Kim Tai Gai -- to kick back $7 of the $240 per ton paid by the United States.
To create the appearance of a legitimate transaction, Warner reportedly insisted that Furrer sign a contract stating that Warner would invest up to $400,000 of Furrer's funds in a pecan grove in Texas.
Warner has ordered a total of roughly $4.8 million in rice seed through Suisindo over the past five months. Furrer, in turn, has made six payments totaling $125,000 over the same period. The seventh payment last night brought the total to $134,000. Warner reportedly expected another $11,000 for additional rice seed purchased but not yet paid for by the United States.
Shortly after the arrangement began, an informant tipped off Abramowitz. The informant was reportedly upset at the manner in which Warner allegedly extorted the money. In Thailand kickbacks are not uncommon in commercial transactions, but it is considered poor manners for a government official to insist on payment and to threaten to terminate an arrangement if the amount is not enough.
Abramowitz notified the State Department and called AID Deputy Auditor General Michael Hershman directly to ask for a prompt investigation. Abramowitz was concerned that the allegations of U.S. official corruption, if true, would undermine the controversial program in Congress as well as damage the already strained credibility of U.S. aid efforts in Southcast Asia.
Hershman dispatched an AID investigator, Charles Vann, to Thailand for six weeks, according to Douglas Bennet, the admiinistrator of AID However, Vann was unable to complete the investigation discreetly in the closed Thai society. Earlier this month, Hershman traveled to Thailand and was able to secure the first direct evidence against Warner. The evidence is said to include a cable from Warner to his Swiss bank asking if the bank had received a litter with a Swiss banknote enclosed drawn on Suisindo's Swiss account.
Shortly after sending the cable, Warner went to Switerland on his way to Washington for a regularly scheduled home leave. Investigators say they believe he opened a new account at a Swiss bank where he already maintains an account.
Hershman brought in the FBI and Justice Department last week when he learned that Furrer planned to go to Washington to make a seventh payment to Warner.
Concerned that Warner might return to Thailand before Furrer arrived to make the next payment, federal investigators arranged through his boss, Kathleen S. Bitterman, to have more work assigned to him here.
Last night's meeting was monitored on a videotape disguised inside a television set in the hotel room and through bugs placed by the FBI in the room, according to a Justice Department source.
According to State Department sources, Warner's other tours of duty in India and Bangladesh will also be investigated. Before those assignments, Warner served in Brazil and Peru. He received the State Department's merit honor award in 1969. Since 1972, he has been at the rank for a Foreign Service Reserve Officer 3, equivalent to a GS15.
No other U.S. diplomats are under suspicion in the probe, according to State Department sources. However, other officials with the international refugee relief program are targets of scrutiny, the sources said.
AID investigators have also attempted to examine allegations that the rice seed and rice sent to Cambodia have been diverted to Vietnam, but are unable to track distribution beyond the Thai-Cambodia border. They do intend to pursue complaints that rice seed provided has been of an inferior quality.
The Washington Post learned of the investigation before its completion. Details were confirmed by Bennet last night. Bennet commended the work of the auditor general's office of AID, particularly the work of Hershman and Vann.