Unraveling the "Best Documented Corporate Crime in American History"


Although largely and scandalously ignored by the mainstream U.S. media what has been characterized as the "best documented corporate crime in American history" --- price fixing in the corn derivative market by Archer Daniels Midland (ADM) --- continues to unfold amidst charges of cover up, federal indictments, the whereabouts of undercover tapes, and a call by stockholders to a former company confidant to exhibit "character, courage and leadership" in exposing corporate wrong doing.

In the three months since ADM --- "Supermarket to the World" --- was indicted and plead guilty to two counts of price fixing in the lysine and citric acid markets and agreed to pay a $100 million criminal fine:

* A 45-count criminal indictment was handed down in January by a federal grand jury against former ADM executive Mark E. Whitacre, charging that while working under- cover for the FBI he embezzled more than $9 million from the company, laundered the money, filed false income tax returns and later attempted to obstruct the government's investigation. It was Whitacre who in 31 months working for the FBI taped between 1400-1600 audio and visual tapes of conversations at ADM at the same time he was stealing money from the company, according to the dates in the indictment.

* Prior to the January indictment Whitacre was also indicted on criminal price-fixing charges in December, along with Michael D. Andreas, the son of ADM CEO Dwayne Andreas and vice chairman of the company and Terrance S. Wilson, who was head of the corn derivative division and Whitacre's boss at the company.

* Three Asian executives --- Kanji Mimoto, then feed-additives general manager of
Ajinomoto Co. of Tokyo; Masaru Yamamoto, then agricultural-products general manager of Kyowa Hakko Kogyo Co. of Tokyo; and Jhom Su Kim, president of Sewon America Inc., a unit of Sewon Co. of Seoul --- pleaded guilty to conspiring with ADM to fix the world-wide price of the livestock-feed additive lysine, along with South Korea's Cheil Jedang Ltd., who plead guilty to one count of conspiring to fix prices.

* Reinhard Richter, the former head of Mexican operations at ADM was indicted for allegedly conspiring to swindle the company out of $171,000 and Frankfurt-based Marty Allison, a former vice president of the company plead guilty in a federal court in Chicago to conspiring to defraud the grain-processing company of more than $300,000.

* 19 California animal feed makers recovered amounts of up to $100,000 each in a class action antitrust suit against ADM and other vendors of lysine while ADM (although it did not admit of wrongdoing in contributing $35 million toward the settlement) and three other companies accused of fixing the price of citric acid have agreed to pay $94 million to several 7-Up bottlers and other companies that use the food preservative.

* The U.S. Justice Department has been ordered by a federal court judge to turn over certain undercover tape recordings to plaintiffs who have filed a civil lawsuit over alleged price-fixing in the sale of a corn-based high-fructose sweetener. Judge Michael Mihm ordered that the tape recordings be turned over to the food processors, baking companies and bottlers who have sued the manufacturers of the syrup including ADM, Cargill Inc. and the A.E. Staley Manufacturing Co. unit of Britain's Tate & Lyle PLC.

* A federal grand jury in San Francisco is continuing to investigate the price fixing in the citric acid industry while a grand jury in Atlanta is investigating the high fructose market.

Meanwhile David Hoech, who heads the ADM Shareholder's Watch Committee in Hallandale, Florida, has condemned the Justice Department for indicting Whitacre. "It's quite strange," he told THE CORPORATE CRIME REPORTER'S Russell Mokhiber, "that the top executives in ADM who were aware of the price-fixing get immunity while the person who made the tapes gets indicted."

In a letter to the recently appointed new head of the Department's Anti-Trust Division Joel Klein, Hoech raised the question whether the department in fact is hiding some of Whitacre's tape conversations. "Our sources tell us there are other tapes that were not turned in but which will also be heard." Hoech went on to predict in his letter that "the public will know in 1997 what is on every tape that Whitacre recorded for the FBI, as the Justice Department will have to bring them out."

THE REPORTER'S March 17 issue has also revealed that according to a January 28 Justice Department memo written by James Griffin, chief of the Anti-Trust division's Chicago field office, federal officials made 237 audio and video tapes and agreed to turn them over to defense attorneys under a protective order.

However, according to the memo, six tapes "were sealed by the FBI for minimization purposes and have never been reviewed by anyone associated with this investigation or prosecution."

In a February 3 issue of FORTUNE Whitacre has told how he not only taped his colleagues at ADM, but also his spy masters at the FBI and the Justice Department and while he no longer has those tapes in his possession, originals, according to other sources, say that several sets still exist. In late December the business magazine learned that the public integrity section of the Justice Department's criminal division launched an inquiry into allegations that the FBI instructed Whitacre to destroy or withhold evidence.

Whitacre in his interview tells how his FBI contact Brian Shepard was really "enamored" of the fact that most of ADM's profits came from fructose, even though that wasn't Whitacre's division.

"The other thing he was really in awe of was Cargill, a major competitor in fructose, four or five times the size of ADM . . . He said, `Mark, there's got to be a tie between ADM and Cargill on fructose. I want you to ask Mick Andreas and Terrance Wilson as much as you can about fructose.'"

Whitacre complied discussing the issue with Mick Andreas while taping their conversation. "Hey," Whitacre asked, "how are we doing in fructose? Surely with fructose prices doing so well, we must be doing the same kind of price fixing with Cargill that we're doing with the Japanese in lysine?" And Andreas said in reply, "look, Mark, Cargill's not going to fix prices. I could call Ernie Micek [then a senior executive at Cargill, now the Company's CEO] today, but he would hang up the phone if I tried to talk to him about what we could do to increase prices."

Whitacre goes on to reveal that when he reported the conversation to Shepard, the FBI agent told him "this case is very important to me, and this tape is not good for us, not good for this case. Which means it's not good for you either, because you are a part of this case now. The best thing you could do with this tape is to take it home and destroy it."

Although he later told Shepard he had destroyed the tape Whitacre held on to it and claims also that he has a copy of Shepard acknowledging "good, good, I don't even want to know how you destroyed it. The main thing is that you got rid of it." After awhile Whitacre recalls it came to him "where I wasn't sure who was dirtier, ADM or the FBI."

Whitacre also revealed that "I had Dwayne Andreas on a couple of tapes as he was being updated on the price-fixing discussion. And ADM President Jim Randall was on the tapes a lot talking about ADM stealing technology. I had Randall walking in on price-fixing discussions between me and Mick and Terry. And yet the government ended up indicting Mick and Terry, but they didn't indict Dwayne and Jim."

Whitacre's puzzlement no doubt stem from the remarks that Gary Spratling, the Antitrust Division's Deputy Assistant Attorney General for Criminal Enforcement who offered after ADM had plead guilty to price fixing: "Today's charges demonstrate that regardless of how much money a corporation pays in a fine to settle criminal charges, the individual executives at that corporation who have violated the antitrust laws will not escape prosecution for their wrongful conduct."

"Part of it," Whitacre continues, "was the way they did the investigation. Brian didn't give a crap about Randall, didn't give a crap about Dwayne. All he cared about was Mick."

In his letter to Klein, Hoech predicts that the actions of Whitacre's former lawyers and those of some FBI agents "will end up being ADM's greatest defense if you [the Justice Department] have to go to trial against Andreas and Wilson." He also pointed out that "the government's case is getting weaker by the day as Whitacre finally has lawyers who are looking out for Whitacre's well being and not the U.S. Justice Department's or ADM's well being."

Whitacre recounts in his FORTUNE interview that he had asked Shepard for help in getting a new lawyer after it was discovered that he had been working undercover for the FBI.

"He called the U.S. Attorney's office and came back with Jim Epstein. Ginger [Whitacre's wife] and I met Epstein the first time on June 30. But the night before I met Epstein,a friend at ADM called and said Jim Randall was telling people in accounting to pull invoices involving Mark Whitacre, that they were going after me for embezzlement.

"What they're calling embezzlement,' he continues, "was actually a bonus scheme approved by top management. And one of the tapes the FBI has is of Mick Andreas approving one of those bonuses for me, for $2.5 million." Andreas's attorney Jack Bray, has denied this and all other allegations made by Whitacre.

It was another ADM colleague who called Whitacre shortly after he was told by an ADM staff attorney to leave his office when it was first learned on June 29 that Whitacre had been spying for the FBI. Before going to his home Whitacre stopped at the Decatur FBI office to talk with Shepard. As farm columnist Alan Guebert later would relate the story in his September 3 "Farm and Food File" commentary, while in the office Whitacre's pager beeped.

"Seeing the telephone number to contact for the page, Whitacre asked Agent Shepard to listen in on his returned call. In it Whitacre was warned by a close friend at ADM not to come back to the office. `Dwayne was just in here,' said the caller, `saying "Whitacre is an [FBI] informant. He's been taping us for years. He spilled his guts to Dowd. We're gonna make his life miserable."'"

James Dowd, was a company assigned lawyer who interviewed Whitacre shortly after the FBI's raid on ADM headquarters on June 27. He was also a partner and colleague of ADM board member and long-time Dwayne Andreas friend, Robert Strauss at the Washington, D.C. office of Akin, Gump, Strauss, Hauer & Field. After Dowd learned of Whitacre's past spying activities he "withdrew" himself from the case.

The "close friend," according to columnist Guebert's sources, that called Whitacre on the 29th was Howard Buffett, who the following month resigned from the ADM board and as special assistant to ADM chief Dwayne Andreas.

According to David Hoech, in the March 17 CORPORATE CRIME REPORTER, sources close to the ADM investigation believe that Buffett, the son of Berkshire Hathaway CEO and mega-millionaire Warren Buffett, resigned his post because he could not tolerate the gross wrongdoing he was witnessing at the company.

Hoech has written Buffett, after learning of a recent address he gave at a Honduras agricultural college where he touched upon the issues of agriculture and ethics and noted that the best aspects of human nature include "character, courage and leadership.Your reputation," Buffett told the students, "will eventually be how the world defines your moral courage, your character and your leadership."

Hoech, in his March 3 letter to Buffett, pointed out that the former company confidant has "yet to explain to ADM shareholders why you departed ADM in early July, 1995. . . You have yet to take a public stand against all the wrongdoing you witnessed at ADM while working side by side with Dwayne O. Andreas," Hoech wrote.

In addition, Hoech told THE CORPORATE CRIME REPORTER, "Howard Buffett had fiduciary responsibilities while he was a corporate officer, assistant to the chairman, and board member at ADM. His father, Warren Buffet, didn't allow misconduct at Salomon Brothers. In fact, he cleaned the company up. The Berkshire Hathaway Fund, headed by Warren Buffett, has the respect and trust of investors worldwide due to Warren Buffett's reputation of honesty and integrity. To Howard, I say this: If you want to talk the talk, walk the walk."

In a footnote the U.S. Department of Agriculture in January notified ADM that it would permit the Company to continue participating in federal food contracts despite ADM's guilty pleas to price-fixing charges. Wall Street analysts estimate that the government annually buys about $85 million of commodities from ADM, most of which are used in the government's foreign food-aid program.

Grant Buntrock, administrator of the USDA's Farm Service Agency, said ADM's admitted rigging of the world-wide prices of lysine and citric acid didn't violate any USDA regulations. To stay in the USDA programs, however, ADM had to agree to let the USDA's Inspector General scrutinize company books and records for three years.

Previously, the USDA had barred the California cooperative Sun-Diamond Growers from federal food contracts for three years after it was convicted of making illegal gifts to former Agriculture Secretary Mike Espy. According to the USDA, the gifts violated its regulations.