The `Kye' A Key To Conflict -- Korean Business Customs, State Liquor-Licensing Rules Have Been Worlds Apart, Leaving Communication And Trust Lost In Cultural Gap -- The `Kye' A Key To Conflict
For two years, Mun Chung Kim and his wife have had only bitter memories and a garage full of beer to show for their shot at the American dream.
Immigrating from Korea 14 years ago, the couple worked and saved money. With their savings, money from friends and cash through a Korean money-lending system called a kye (pronounced "keh"), they opened a small grocery store in Burien in 1989.
For the first four months, with Kyes are a secret to Korean business success. A 11
a temporary liquor license to sellbeer and wine, sales soared and dreams of success were coming true.
But the Kims' dream evaporated when they couldn't surmount bureaucratic hurdles set up by the state Liquor Control Board.
Unable to document where all the money for financing came from, the family was denied a permanent liquor license. Cases of beer and wine that immediately had to be removed from the store. Most still remain in the family's garage. Unable to sell liquor, the store lost significant trade. A year later, the Kims sold the business for $70,000 less than they paid.
The Kims' case underscores a clash between Korean businesses that use a traditional, informal method of financing widely used in the Asian community, and the state liquor board, which insists on paperwork to substantiate that applicants have legitimate financing.
While the liquor board has recently made changes in its policies, the conflict has frustrated liquor-board agents, forced businesses to close and discouraged others from opening, leaving communication and trust lost in a cultural gap.
The Kims, like many Korean immigrants, relied on the informal Korean financing network to get them started. New to the country, speaking a new language, and without a credit history, immigrants often can't find banks willing to risk a loan, said David Lee, president of the Korean Chamber of Commerce in Seattle.
By loaning cash among friends or pooling their money in a kye, immigrants can drum up cash. Typically, a kye leader gathers a group of 15 to 25 people who each month contribute a few hundred dollars to a central pot. The lump sum - between $10,000 and $20,000 - goes to each member on a rotating basis. Members may have to wait a couple of years to receive their allocation.
This informal exchange can pose significant problems for those wanting to gain a liquor license for a grocery operation - a business where beer and wine sales account for 10 to 20 percent of revenue. The license becomes doubly important because liquor sales draw customers who then buy other items.
For the liquor board, it's a matter of substantiating that the sources of money are legitimate, and not drug or organized-crime-related for instance.
"We're trying to maintain the integrity of the liquor industry in the state," said David Goyette, state Liquor Control Board assistant chief of enforcement. "Our basic concern is who are the applicants, are they responsible and are they the true parties."
While the board recognizes a need to make cultural accommodations, it also must do its job, says Goyette. There are a number of applicants, of all backgrounds and ethnicities, who deliberately try to subvert the system and hide other investments or not divulge full information.
But Goyette acknowledges that some Korean applicants using kye money who receive licenses today may have have been denied them in the past.
"Some agents may have been suspicious (of a kye)," said Goyette, "I think with knowing what we do today, we may have made a different decision with kyes than we did three, four years ago."
In fact, the liquor board has taken several steps to cross the cultural gap between its policies and Korean grocers, who comprise more than 15 percent of liquor-licensed grocers in the region - primarily small mom-and-pop corner stores.
Liquor agents have set up a committee to listen to Korean grocers' concerns and recently adopted standardized requirements for those involved in private financial groups, such as a kye.
Previously, an agent could ask for any number of documents or records. Now there's a set procedure that standardizes and simplifies the process.
The new rules cover any private financial group of two or more, regardless of race or ethnicity, who combine their funds for a business.
Depending on the amount contributed by individual members and the group, the applicant can still be required to document the group leader's personal and criminal history, verify the source of funding when documents are available and provide an affidavit. In some cases, the applicant must submit Social Security numbers and other personal information on group members.
But for the Kims of Burien, the changes and heightened awareness come too late.
Coming from Korea and hoping for a better life for their four children, Mun Chung Kim worked as a machinist for a Burien company, taking just six days off in his first year. His wife, Yong Cha Kim, designed handmade wigs and worked as a housekeeper for a nursing home. She later worked as a maid at a hotel until a fall left her with a broken shoulder, ankle and several slipped discs in her back.
But the pain she felt then is nothing compared to the pain she still harbors for her dream turned sour. The memory still evokes tears from her and a resigned sigh from her husband.
Opened in 1989, their small grocery store, called the Burien Garden Food Center, thrived at first.
With the temporary liquor license set to expire in November, the Kims applied for a permanent liquor license.
Then came what seemed like cultural intolerance and suspicion, they said.
A liquor agent required bundles of paperwork that they had submitted twice before in order to test consistency and accuracy.
But to no avail, they said. Even with a petition signed by a few hundred customers, the liquor board denied them a permanent license and refused to review the case.
"They treat us like criminals," said Inkyong Yun, the Kims' now 29-year-old daughter. "Like whenever we say something, they treat us like we are lying.
"We never did anything wrong," she added.
"We get so angry, but we cannot say anything. . . . Well, my mother cannot say in English her feelings. She get stomach ulcer because she was too much angry."
Selling the business a year later, the family swallowed the bitter loss and gave up on owning their own business.
It comes down to a fundamental difference in culture, says Rocky Kim, executive adviser and past president of the Korean American Grocers Association of Washington.
In the United States, money exchange is formalized by paper; in Korean friendships and kye, money exchange is formalized by trust.
Kim owns a grocery store, Rocky Mini Mart in Edmonds, which he purchased with proceeds from other business sales.
"Americans don't understand that kind of culture," he said. "They don't buy it as a source of funds for opening a business. . . . The problem with the Korean community is it is trying to survive in the United States with a new culture, new law, new language and totally opposite way (of financing). They didn't grow up in that kind of system."
Other factors complicate matters. For instance, many immigrants cannot speak English well and often get confused when trying to answer questions.
"They're not trying to lie," Kim said. "They can't explain the kye. They get nervous and can't talk," Kim said. "The liquor board thinks it's laundered money and drug money. If I can make easy money, why do I want to be a grocer and get involved with the long hours and hard work?"
And the story from many Korean grocers is the same. From 5 or 6 in the morning until 10 or 11 at night, every day, they and their family work in the store. It's not easy, but it is a business that they can call their own.
Word spread among those wanting to open grocery stores not to mention any affiliation with a kye because of a perceived bias. But that led to more problems.
"People can't explain (a kye) to the liquor board," Kim said. "They say they borrow money. (The liquor board) wants to know who the lenders are, their background, how much money. The Koreans can't provide all that. The liquor board say they are lying and deny license."
The hesitance to admit a kye affiliation fueled some of the resistance Koreans may have found among agents, says Ted Taketa, a senior liquor agent for the state liquor board, and one of the first agents to make overtures to Korean grocers.
"Depending on what the applicant says, they could create their own monster," he said, adding that if applicants do not offer the information that the board requests, and the board discovers that the applicants have not been completely truthful or forthcoming, it will require more documentation to determine the money source.
Watson Woo, owner of a small grocery store in Yelm, was one of the lucky ones. After receiving a temporary license with little hassle, he submitted forms for a permanent license. Then came the problems, Woo said. With requests for all members' Social Security numbers, addresses and other personal details, which he could not provide, he worried whether he could keep operating the store.
But one of the biggest frustrations was that this was the second time that Woo had to jump through bureaucratic hoops for a liquor license. Ten years earlier, he opened a small convenience store in Tacoma, again with money from a kye. He spent hours with the liquor agents, explaining the difficulties in raising money as a new immigrant and detailing how a kye works.
Woo's U.S. education helped. Although born and raised in Korea, the now-36-year-old spent three years in Los Angeles at California State University, Northridge. His English, though not smooth, is clear. To him, this is the crucial factor.
"Many people are not able to explain situation," he said. "Liquor Control Board, they do their job, but problem is we are immigrants. Not knowing English, that makes plenty of problems."
The impetus to change the liquor board's stance toward the kye comes partially from Taketa.
He gradually gained the confidence of Korean business owners, running training sessions on the responsibilities of liquor licensees in selling alcohol and encouraging other agents to do the same. As the agents became more and more familiar, licensees grew more comfortable coming to the agents with their concerns and complaints.
With no Korean-speaking agents, the liquor board also turned to Lori Wada, the Asian liaison for the state Lottery Commission, who deals with Korean grocers when they apply to sell lottery tickets for the state. As with the liquor board, the Lottery Commission tries to determine the legitimacy of a ticket dealer's operation. Wada, who herself immigrated from Korea to the United States in 1974, also helps explain new lottery game rules to merchants. About 10 percent of lottery ticket retailers in the state are Korean-owned businesses, Wada said.
Wada has tried to explain the cultural significance of kyes to the liquor board as well. The result is that today there are brochures and information packets translated into Korean. The liquor-license test is also available in Korean. The new requirements were adopted in October and now "kye" is a familiar word to liquor agents.
Taketa is also a member of a committee of liquor agents and division representatives to improve communication specifically with the Korean community. Formed last year, the committee has six or seven members.
But even with these changes, there may be some resistance. Taketa says Korean applicants often are worried about how the information is used. And others think the documentation excessive.
"I think it's unrealistic in terms of what they require," said Benjamin Lee, an attorney who represents Korean clients. Few people are willing to release personal information, he added, suggesting that an affidavit from the kye leader should be sufficient.
"Most liquor agents who know what is a kye, they know that a kye is not illegal money. Still they require a lot of things," said David Hong, a Korean immigrant and Seattle commercial real estate agent who has worked with many Korean grocers and liquor license transfers. "Now some Koreans are afraid to buy grocery stores because of liquor license board unless they have a good source, good money trail. . . . Only American bank is good for liquor board."
And stories that the American dream is more than a trite concept have little sway with Inkyong Yun, Mun Chung Kim's daughter. After the incident with the liquor board and the loss of her parents' store, she moved back to Korea.
Copyright (c) 1992 Seattle Times Company, All Rights Reserved.