A federal lawsuit charging "Koreagate"-style kickbacks in California's huge rice industry has created a political furor in South Korea and threatened to overload West Coast storage facilities with unsold rice.
California's two largest rice grower cooperatives, represented by former San Francisco mayor Joseph L. Alioto, filed suit March 4 against Pacific International Rice Mills Inc. and a Swiss company called Agroprom, charging that the two companies won a contract to sell 130,000 metric tons of rice to Korea in return for as much as $6 million in kickbacks to Korean trade officials.
Pacific International Rice Mills, a San Francisco concern usually called "Pirmi," countersued March 15, accusing the rice cooperatives' sales agent, Connell Rice & Sugar of Westfield, N.J. of slander and a deliberate attempt to sabotage an honest effort to get into the lucrative Korean rice trade.
A U.S. State Department spokesman said preliminary inquiries had uncovered no evidence of any payoffs, but the Korean government of President Chun Doo Hwan, which has heavily publicized its campaign against official and business corruption, suspended purchases of California rice while a committee of the Korean National Assembly investigated the allegations.
Some trade officials say the Koreans are suggesting sales may not resume until November, leaving growers with no place to store the 1982 crop they begin harvesting in September and perhaps costing U.S. taxpayers several million dollars in loan payments under federal support rules.
A record 1981 crop has already glutted the world market, leading some California growers to fear that they will have no one to sell to if the Koreans drop out. A House Agriculture subcommittee chaired by Rep. David R. Bowen (D-Miss.) recently held hearings to discuss the extent of the South Korean purchase commitment and how the Reagan administration was handling the matter. A final report has not been issued.
A State Department spokesman said the U.S. government was confident the South Korean government would honor its commitments to buy 1981 U.S. rice after its investigation, but according to Deputy Assistant Secretary for East Asian and Pacific Affairs Anthony Albrecht, the delay risks "serious damage to U.S. political, security and trade interests."
"It puts us in a hell of a bind," said Earnest E. Hatch, who grows rice and wheat on 500 acres in Oroville, Calif. "We have a lot of rice already in storage, which it appears we are going to have to carry over."
Hatch, member of one of the suing groups, the Farmers' Rice Cooperative, called the suit an ill-advised move based on misunderstanding and perhaps some personal animosity among the principals. He said it threatened to alienate the Koreans and had severely slowed payments coming back to him from rice sales because of the delay in Korean shipments, forcing him to borrow money at high interest rates to finance preparations for next year's crop.
Byung Suh, a counselor for cultural affairs for the South Korean government here, said Korean press reports from Seoul indicated the assembly committee investigation was still continuing, with no indication when it would end.
Without any evidence presented to support the cooperatives' kickback allegations, other rice traders are calling the suit a weapon in a continuing commercial war between Connell, the U.S. leader in rice sales to Korea, and the newcomer Pirmi. "Nobody wins if we scare off a good customer," said Bruno Rocca, a Pirmi official and son of Pirmi President Curtis M. Rocca Sr.
Grover Connell, president of the Connell firm, was indicted in 1978 for defrauding the United States in overseas rice sales and lying to a grand jury in connection with his payments to South Korean businessman Tongsun Park. He was accused of paying $600,000 to Park between 1972 and 1975, money that Park allegedly used to buy influence in Washington. But in April, 1979, charges against Connell were dropped when Park changed his testimony about his relationship with the rice dealer.
Alioto represented Connell in his dealings with federal prosecutors. Connell has continued to handle exports for the California cooperatives.
The suit filed by the Rice Growers Association of California and the Farmers Rice Cooperative in U.S. District Court in San Francisco charges Pirmi and Agroprom with conspiring with "certain individuals in the Office of Supply" of the South Korean government, including office administrator Kim Joo Ho.
It also charges Agroport Inc., described as an affiliate of Agroprom, and Agroport's chief executive officer, William Perell, as participating in a conspiracy in violation of U.S. antitrust laws.
The suit charged that Pirmi and Agroprom agreed in February and March of this year to ship 130,000 tons of California medium-grain brown rice to Korea for a price far above the market price.
"The amount of money constituting the excess above market price of about six million dollars is being used by defendants Pirmi and Agroprom to pay or share with certain individuals in the Korean government supply office for the favor of awarding the contract and/or to subsidize future sales," the suit charged.