If a corporation could go to prison, the Archer Daniels Midland Company would now be under lock and key instead of extolling nature in its new commercials. In 1996 the Decatur-based food-processing giant pleaded guilty to violating the Sherman Antitrust Act. It admitted to conspiring with four Japanese and Korean firms to fix the price of lysine, an amino acid used mostly as an animal-feed additive, and it paid a $100 million fine, at that time the largest in antitrust history. In 1998 ADM executives Michael Andreas, Terrance Wilson, and Mark Whitacre were charged with the same price-fixing conspiracy. Tried and convicted, they’re now doing the Club Fed time their former employer can’t.
Andreas and Wilson appealed to the Seventh Circuit Court of Appeals in Chicago, arguing that they hadn’t really conspired and that they’d actually lowered lysine prices. But on June 26, 2000, the court, in an opinion written by judge Michael Kanne, upheld their convictions and ordered their two-year sentences increased. When the U.S. Supreme Court declined to hear an appeal in November, Kanne’s became the last judicial word on the case.
Judge Kanne observed that the executives involved weren’t innocents who’d blundered into some legal gray area. Besides fixing prices, ADM and its competitors had “spied on each other, fabricated aliases and front organizations to hide their activities, hired prostitutes to gather information from competitors, lied, cheated, embezzled, extorted and obstructed justice.” In the judge’s view, “an inexplicable lack of business ethics and an atmosphere of general lawlessness…infected the very heart of one of America’s leading corporate citizens.”
ADM’s amorality may be hard to explain, but it shouldn’t have come as a surprise. The company has fixed prices before, and it has used its political muscle to help pass laws that shortchange consumers–lobbying, for instance, to jack up the price of sugar so that its own more expensive high-fructose-corn-syrup sweeteners could compete. From there it was a short–but illegal–step to shortchanging consumers by joining with competitors to fix prices.
Prosecutor Scott Lassar described the evidence that the three executives conspired to fix prices as “an arsenal of smoking guns.” There’s no question of guilt or innocence in this wild tale of deceit and degeneracy. But in the aftermath of the trials there remain some unexplained oddities. For one thing, the FBI never questioned ADM chairman and chief executive officer Dwayne Andreas. For another, Mark Whitacre, the whistle-blower, wound up being sentenced to far more time for his misdeeds than Michael Andreas or Terrance Wilson, who’d organized the price-fixing conspiracy. Was there a thumb on the scales of justice?
Back in 1992 Whitacre’s wife, Ginger, urged him to do the right thing and tell the FBI about his employer’s price-fixing. He hesitated, telling her, “I’m more scared of ADM than I am of the FBI.” His subsequent actions show that he didn’t always have a firm grip on reality, but this statement does have an eerie ring now that he’s in jail and others aren’t.
It’s not easy to do justice to both halves of this convoluted case–the white-collar intrigue would make John Le Carre or Scott Turow proud, as would the murkier consideration of whether a mere nation can bring a multinational corporation to justice. Of the two books published on the case so far, New York Times reporter Kurt Eichenwald’s The Informant tells a gripping cops-and-robbers story, while attorney James Lieber’s Rats in the Grain reflects on whether the robbers got all they had coming. Neither book succeeds in giving a clear overview. Eichenwald creates narrative tension by withholding important facts until the end, while Lieber’s book reads more like a legal brief than a story.
Eichenwald has received more and better reviews of his book, which he says is about “the malleable nature of truth.” Lieber may not spin as good a yarn, but he understands that there’s more at stake here than entertainment. It’s a pity the two couldn’t have got together, for the story of ADM’s crimes is a warning that needs to be heard. During the 1990s, in downstate Decatur and around the world, lies were told and the truth shaded–not to give us some queasy Rashomon experience of the multifaceted nature of reality, but so that a few could enrich themselves at the expense of many.
Archer Daniels Midland buys, sells, and processes farm crops–usually corn and soybeans, but not always. Often it turns grains into ingredients and sells them to other food companies. Corn becomes high-fructose corn syrup and winds up sweetening your soft drink. Soybeans become soy oil and end up in everything. Because its name doesn’t appear on supermarket shelves, ADM has never been a household word, even though, as Lieber notes, when our tale opens around 1990 it was 57th on the Fortune 500 list.
ADM began to hit the big time when its founders sold a controlling interest to an ambitious, fast-rising grain executive in his 40s named Dwayne Andreas, who in 1968 became chairman of the board and chief executive officer. By 1973 he’d doubled company profits, to $117 million a year. This prequel to the price-fixing case is told in the fawning but indispensable Supermarketer to the World by E. J. Kahn Jr., published in 1991.
Andreas had already made a name for himself as a maverick in the grain trade and on related political issues. He supported trade with the Soviet Union for humanitarian and financial reasons even in the 1950s, the cold-war heyday of red-baiting Wisconsin senator Joseph McCarthy. In 1989 Andreas told a Brookings Institution audience, “The U.S. and the Soviet Union have nothing to fight about. Our common interests far outweigh our differences. Cooperation is an economic and national security imperative for both our countries.”
A consummate political switch-hitter, Andreas began by making friends with two-time Republican presidential candidate Thomas Dewey and Democratic rising star Hubert Humphrey and spreading campaign money around lavishly. In 1973 Watergate special prosecutor Archibald Cox filed federal charges against Andreas for contributing $100,000 through his family’s private investment company to Humphrey’s 1968 presidential campaign, a questionable act given that direct corporate contributions to politicians had been illegal since 1907. The charges were eventually dismissed. According to Kahn, Andreas saw it as a technicality: “He had simply borrowed the $100,000 from a company that he and his kin owned outright and within a month had paid it back.”
Andreas is the sort of person who knows everyone and enjoys it. “He cut deals with Juan and Evita Peron of Argentina,” writes Eichenwald in The Informant, “and touted the benefits of soybean oil to Francisco Franco of Spain. In Yugoslavia, he stayed up into the wee hours with Tito and in the Soviet Union, chatted with Joseph Stalin about vegetable oil.” On first meeting House speaker Tip O’Neill, Mikhail Gorbachev said, “Oh yes, Dwayne Andreas told me about you.” In 1985 Andreas helped broker a meeting between Gorbachev and President Reagan.
All this influence helped ADM grow. Andreas wanted the federal government to subsidize grain exports, as in the Food for Peace program. Between 1985 and 1995 ADM received more than $130 million in subsidies through the Export Enhancement Program, according to a 1995 report by the libertarian Cato Institute. That same year Andreas testified before Congress on behalf of the Coalition to Promote U.S. Agriculture Exports. “We hear it said that now is the time to sharply reduce or even eliminate many of our existing policies and programs and simply allow the free market to work,” he told the Senate Agriculture Committee. “Well, let me tell you, when it comes to agriculture–there is no such thing as the free market.” (Incidentally, those who lambaste ADM’s lawlessness today rarely make one striking connection: ADM the corporate criminal has also been ADM the promoter of international food aid, ADM the scoffer at free markets in farm commodities, and ADM the proponent of detente and trade with the Soviet Union. Under Dwayne Andreas, ADM was as close to a left-wing corporation on policy issues as this country has ever seen.)
Andreas also wanted the government to help make the expensive corn product ethanol less expensive, so it would be an affordable gasoline additive. ADM controls over half the ethanol market. According to Kahn, in 1979 Andreas’s friend Senator Bob Dole was instrumental in getting Congress to cut the federal excise tax on ethanol from nine cents a gallon to three and to add a 40-cent-a-gallon tariff on imports of the stuff. A few years later the price of corn had risen and the price of gasoline had fallen, making ethanol an even harder sell. The Cato Institute report notes that the U.S. Department of Agriculture then announced a new program under which ADM would receive $29 million in free corn–two days after Dwayne Andreas and his top lobbyist had breakfasted with the secretary of agriculture. Other large ethanol producers got their share as well.
In addition, Andreas wanted high tariffs and price supports on sugar to make it cost so much that ADM’s pricey high-fructose corn syrup could compete. Citing Business Week and other publications, the Cato Institute described ADM as “the driving force” behind the American Sugar Alliance’s successful 1995 campaign to keep U.S. tariffs and price supports on the commodity.
In 1995 Prudential Securities analyst John McMillin estimated that 43 percent of ADM’s $746 million profit came from corn sweeteners and ethanol, products heavily subsidized or protected by the American government. The Cato Institute argued that the company’s dependence on federal largesse was probably even greater, “because the substantial gain derived by ADM from various domestic crop support programs and export subsidies is virtually impossible to quantify.”
ADM attracted the notice of the government’s legal system as well as its corporate-welfare agencies. James Lieber reels off the company’s antitrust raps in Rats in the Grain: “In 1976, ADM pleaded no contest when charged with the short-weighting and false grading of grain for export. Two years later, ADM and two other companies were convicted of conspiring to fix prices in the Food for Peace program. In 1982, the government began a case to force ADM to spin off some of its HFCS [high-fructose corn syrup] mills over an allegation of monopolization, but in 1991 a federal judge dismissed the charge. In 1994, ADM was named in an alleged conspiracy to rig prices, bids, and allocate markets in the liquid carbon dioxide business, which supplies soft drink bottlers and municipal water systems. ADM paid $80,000 to the state of Florida and $1.4 million to the victims of the scheme in order to extricate itself from the case.” ADM was probably due to get into more trouble, but who would have predicted how much?
ADM was more than an unusually voracious piglet sucking at the public teat and kicking others away. The company enjoyed a reputation for being more adventurous and less bureaucratic than its agribusiness fellows. In 1989 it had sales of almost $8 billion a year and was enjoying a return on capital well above competitors such as Cargill. That was the year Andreas made the fateful decision to move beyond grain processing and into biotechnology–joining a tight-knit group of four Japanese and Korean companies in high-tech lysine farming.
When the amino acid lysine is added to hog and chicken feed it causes the animals to bulk up faster. The Japanese and Korean companies had developed a way to manufacture it by growing certain microbes in sterile fermentation tanks. “As people in the business liked to say,” writes Eichenwald, “the bugs ate dextrose and crapped lysine.” In October 1989 ADM hired a 32-year-old nutritional biochemist, Mark Whitacre, to start and run what would soon be the world’s largest lysine plant. According to Eichenwald, he was “almost certainly the first Ph.D. ever employed at ADM as the manager of a division.”
Whitacre had the ability and energy to get the $150-million plant up and running. He also had the gullibility and overconfidence to create a lot of problems for himself. As Eichenwald tells it, one key episode began with a letter Whitacre received in 1990, from someone claiming to be a Nigerian bureaucrat who’d obtained tens of millions of dollars from that country’s military government by inflating the cost of contracts with foreign firms. The letter writer asked for Whitacre’s help in getting the money out of the country. All Whitacre had to do was supply some company letterhead, some bogus invoices, an overseas bank account, and an investment that seemed small compared to the potential return of millions–he was promised 30 percent of the take.
Only a well-off person could afford to respond, and only a greedy one would want to. Whitacre fell for the scam. Over a period of months, whenever the payoff seemed imminent, his correspondent would regretfully announce that just a little more money was needed. By the time Whitacre got wise, he’d sunk $200,000 into the scheme and had pressured subordinates to invest, promising to repay them if it went wrong.
When his second-in-command, Marty Allison, asked Whitacre for his money back, Whitacre decided to defraud his employers much as the Nigerian bureaucrat had defrauded him. He would submit an invoice for $81,250 for nonexistent services to ADM; ADM would pay the money to a chum of Allison’s, who would get half, and Whitacre and Allison would split the rest. As Allison later told the FBI, he worried that their employer might find out. “Marty, I’m the division president,” Whitacre replied. “Nobody will question me.” And nobody did.
Money this easy proved too tempting to resist. Over the next few years, Whitacre skimmed off about $9.5 million by submitting phony invoices payable to overseas bank accounts he controlled. That sounds like a lot of money, and it is. But it’s also only about one-tenth of one percent of ADM’s annual sales at the time–one penny of ten dollars.
Meanwhile ADM was making lots of lysine and breaking into the market by underselling its four competitors, destroying the price-fixing cartel they’d maintained among themselves. A 1991 price war drove lysine down from an earlier high of $3 a pound to as low as 58 cents a pound–a figure at which, according to Lieber, “the operation was not even paying off the building costs.”
ADM was just making a point. It didn’t intend to keep on competing. In April 1992, Michael Andreas–ADM vice chairman and son of Dwayne–ordered Whitacre to start working with Terrance Wilson, president of ADM’s corn division. Wilson didn’t know anything about lysine, but he didn’t need to. He’d already turned a mutually suspicious group of citric-acid producers into a functioning cartel, and now he would teach Whitacre to do the same with the makers of lysine. They began in June 1992, when representatives of three of the companies met in Mexico City. Wilson and Whitacre represented ADM. The firms agreed to raise lysine prices to $1.05 by October and $1.20 by December in North America and Europe.
Of course, ADM could join the lysine club only if it could still credibly threaten to produce enough to drive the price down. In the fall of 1992 some of its microbes became balky, often dying before they made any lysine at all. The company kept up sufficient production, but the unsolved problem was a worry for weeks. Under pressure, a frustrated Whitacre finally went too far. He concocted a story he thought would gain him time to fix the plant and make him wealthy too. Instead, it started a fast-moving chain of events that eventually led to his undoing and ADM’s exposure.
Eichenwald writes that Whitacre told his boss, Michael Andreas, that he’d received a furtive phone call from Kotaro Fujiwara, an engineer employed by their major competitor, Ajinomoto. Whitacre claimed that Fujiwara had told him he’d introduced a contaminant into ADM’s lysine factory–a complete fabrication. Supposedly Fujiwara would tell Whitacre what it was and how to fight it–as soon as ADM paid $10 million to a certain overseas bank account.
Andreas asked Whitacre to try to talk the extortionist’s price down. Meanwhile he consulted with his father, Dwayne; according to E.J. Kahn, the two spoke at least three times a day on all subjects. The family agreed to ask their friends in the Central Intelligence Agency to look into the matter. Would there be international ramifications if Ajinomoto were closely tied to the Japanese government? The CIA quickly concluded that extortion was domestic business and referred the case to the FBI–an outcome that nobody seems to have expected.
The FBI’s strategy for dealing with international blackmail was straightforward: it would gather evidence by recording the extortionist’s phone calls, while Whitacre would attempt to lure him onto U.S. soil, where FBI agents could arrest him. But as Eichenwald tells it, ADM’s response to being blackmailed was much less straightforward. First, Michael Andreas expressed a distaste for wiretapping company telephones. “I don’t want my people taped unless they know about it or I know about it ahead of time,” he told FBI agents. Then when Decatur FBI agent Brian Shepard tried to talk to Whitacre about tapping his home phone instead, Whitacre kept putting off the interview. Within a week the company ceased cooperating with the FBI on the matter altogether.
ADM wasn’t acting like the victim of a multi-million-dollar blackmail attempt, and no wonder. It had too much to hide. Whitacre went so far as to tell ADM’s security director that an “Asian-sounding man” had called his 15-year-old daughter at boarding school. The caller supposedly told her that if Fujiwara wasn’t paid right away, she would be in trouble. Whitacre had hoped this bizarre tale would drive the company to pay up and render the FBI’s services irrelevant, but it just made him look weird.
Shepard finally met with Whitacre at his home on the evening of November 5, 1992, and set up the equipment to record the extortionist’s next call. The ensuing scene is one of Eichenwald’s great set pieces in The Informant. As Shepard left the house, Whitacre followed him out to his car. There he explained the real reason–well, one of them–that he’d been so jumpy. It had nothing to do with Fujiwara’s extortion, he said. “I’ve been involved in several meetings with our Japanese and Korean competitors, where the sole purpose is to fix prices,” he told the astonished agent. “I’ve been instructed to go by the company.”
As Shepard struggled to take notes in the dark, Whitacre explained that the FBI was sure to find evidence of the price-fixing in its quest for the extortionist. He’d decided to confess first and turn in his colleagues. He wanted to do the right thing, and he wanted to protect himself. But he never told the FBI about his ongoing invoice frauds, which he still thought he could keep secret.
Whitacre’s willingness to cooperate was an enormous break for the FBI. Proving that prices have been fixed is like locating black holes in space, explains Eichenwald. “Neither could be seen directly; their presence had to be deduced by examining the surrounding environment.” Against astute defense lawyers, such a case is hard to make. Having a mole inside would make it much easier.
It hadn’t escaped the notice of ADM’s top management that Whitacre was acting strangely and making things up–the alleged extortion plot, for instance, suddenly just evaporated. Eichenwald tells the following story, which he based on grand jury testimony: Dwayne Andreas was inclined to fire Whitacre, but ADM president James Randall objected, because Whitacre’s technical expertise was indispensable to his division, which was making more money than any other. “The margins are bigger than any other business line. We can’t do it without him.” Andreas agreed to keep him on.
The decision not to fire Whitacre allowed him to operate as a triple agent for the next two and a half years. He acted simultaneously as a loyal ADM employee running the lucrative lysine business, as a greedy embezzler continuing to funnel millions from the company into his own pockets, and as an FBI mole secretly rolling tape as his bosses and colleagues incriminated themselves in a scheme involving hundreds of millions of dollars. (Lieber describes a Purdue University study that later estimated the lysine cartel had caused “domestic market injuries” of $165 million to $180 million–an order of magnitude far greater than Whitacre’s theft.)
In his role as an informant, Whitacre was unique. According to FBI agent Shepard’s research, as reported by Lieber, never before in American history had so high a corporate official been willing to turn his colleagues over to the law.
Most people would crack under that much pressure. Whitacre’s subsequent lies and delusions suggest that he did. He persisted in thinking that the FBI would protect him from prosecution, even though he was repeatedly told that no such promise could be part of the deal. He was serenely and unrealistically confident that he would be chosen to succeed Dwayne Andreas as CEO once the price-fixing scandal became public, because he’d “done the right thing”–by being involved in only a subordinate role in the conspiracy for only a few months before blowing the whistle. He lied repeatedly to the FBI–claiming early on that the price-fixing plan had been abandoned and twice failing polygraph tests, though he was sure he’d passed. He attempted suicide twice, though it’s unclear how serious the attempts were. He told a number of people at ADM about his cooperation with the FBI before it became public, even telling his gardener to refer to him as 014, “because I’m twice as smart as agent 007.” Before his trial he turned on the FBI and accused Shepard of making him destroy tapes–an unfounded charge he later recanted under oath. Late in 1995 a North Shore psychiatrist put Whitacre on lithium, a medication used to treat manic depression.
Whitacre’s behavior was so erratic that the government’s case against ADM might well have collapsed had prosecutors had only his testimony to go on. But it turned out not to matter. The tapes he obtained were clear and incriminating.
Meanwhile the price-fixing conspiracy needed shoring up. A simple agreement to fix prices can be easy to reach but hard to maintain, Eichenwald explains, because companies will naturally try to cheat by producing more and increasing their market share. The conspiring companies needed to agree on how much lysine to produce and how to split it up among themselves–then they could agree on the price and feel it was more likely to stick. But after several meetings the five companies still hadn’t been able to agree on how much each would produce, so top executives from ADM and Ajinomoto met on October 25, 1993, at a Marriott hotel in Irvine, California.
Michael Andreas and Whitacre represented ADM, and thanks to Whitacre’s cooperation, the FBI was able to videotape the gathering. Andreas’s presence was key, as Judge Kanne noted in his appellate court ruling. Andreas “threatened [Ajinomoto managing director Kazutoshi] Yamada that ADM would flood the market unless a sales volume allocation was reached that would allow ADM to sell more than it had the previous year. The four discussed the dangers of competing in a free market and hammered out a deal on volume allocations, with Andreas accepting less than a one-third share of the market in exchange for a large portion of the market’s growth. Specific prices were not discussed, but Andreas acknowledged the price deal that had already been negotiated. Yamada agreed to present ADM’s proposal to the other three Asian producers.”
The lysine production shares tentatively agreed on in Irvine were confirmed and clarified at a March 1994 meeting in Tokyo, where ADM’s Terrance Wilson proposed that the five companies check up on one another. According to Lieber, each would phone its production figures to Ajinomoto manager Kanji Mimoto every month, which would enable the group to police cheaters. If one company sold more than its share in a given month, it would be required to buy lysine from companies that had been unable to sell their share, until the originally agreed-on market quotas were reached again.
Whitacre taped Wilson as he warned the group to be cautious when they committed the illegal act of telling Mimoto how much lysine they’d produced. “We have to watch our telephones. It can be done, but it must be very careful.” And he explained ADM’s business philosophy in terms anyone could understand: “You’re my friend,” he told his supposed competitors. “I wanna be closer to you than I am to any customer, ’cause you can make it that I can make money or I can’t make money.”
On June 27, 1995, after more than two years and more than 100 tapes, Whitacre’s undercover role ended. FBI agents fanned out across Decatur serving subpoenas and taking custody of documents at ADM headquarters. Agents approached Michael Andreas and Terrance Wilson individually, asking them to confess and help the government. “This is probably the most impressive antitrust case in history,” agent Shepard told Andreas. Both men maintained their innocence. According to Eichenwald, when one agent accused Wilson of helping to form a lysine trade organization to provide a cover for price-fixing, Wilson asked what he meant by the word “cover.” In court three years later, once the pretense of ignorance had become untenable, Andreas and Wilson defended themselves by claiming that they’d only been fooling with the other companies–they’d never fixed prices at all.
Following the raid, it became clear that Whitacre was a mole, and ADM cut him loose. To the media and the public, he appeared to be a virtuous whistle-blower bringing a villainous corporation to justice. The prosecution case against ADM looked like clear sailing, and Whitacre himself still entertained delusions of succeeding Dwayne Andreas.
But less than two months after the raid, company lawyers changed everything when they found evidence of Whitacre’s embezzlement. The journalists’ easily told black-and-white narrative dissolved into murky shades of gray. ADM lawyers thought that by discrediting the FBI’s cooperating witness, they might even derail the prosecution altogether, and it became clear that the only corner office Whitacre was headed for would have bars on it. And because Whitacre had violated his cooperating-witness agreement–he’d promised not to engage in unauthorized criminal activity–he was also charged in the price-fixing case.
The news that Whitacre had been stealing from ADM while informing on the company greatly complicated the prosecutors’ task. A key price-fixing witness would now be a defendant in a closely related fraud trial. The FBI and the Department of Justice would be unusually vulnerable to criticism–no matter what they did, they could be seen as going too easy on the bad embezzler or too hard on the good whistle-blower. To prevent any apparent conflict of interest, for a time agents and lawyers working on one case were not allowed to communicate with those working on the other. As the cases grew bigger and more tangled, overall direction came increasingly from Washington–where ADM had maximum clout–rather than from Chicago or Springfield. When FBI director Louis Freeh first heard of the price-fixing case in February 1995, he didn’t have to ask what ADM stood for. “How strong a case is it?” he asked a subordinate. “If it’s ADM, it had better be good.”
According to Eichenwald, who tells the story largely through the eyes of rank-and-file law enforcement, some FBI agents worried that the government attorneys might concentrate on the easier case against an individual who’d stolen millions, while easing off on the more difficult case against ADM and Whitacre’s bosses even though it involved hundreds of millions. “ADM and its managers are being ignored,” Springfield agent John Hoyt complained to Freeh in September 1995, “while DOJ is concentrating their efforts on looking into allegations against Whitacre and our agents. They appear intent on catching goldfish while Moby Dick swims away.” The evidence that something like this actually happened is only circumstantial, revolving around the outcomes of the three intertwined federal criminal cases that grew out of the investigation.
ADM itself faced price-fixing investigations involving not just lysine, but also citric acid and high-fructose corn syrup. According to Lieber’s account, the fine for lysine could have reached $500 million and the fine for citric acid $224 million. Eichenwald describes the negotiating process that led to the corporation’s guilty plea. At first ADM offered to plead nolo contendere to fixing prices for lysine and citric acid, “allowing the company to dispose of the criminal case without giving evidence of guilt” to its customers, who were poised to sue it for civil damages. No ADM officers would be charged, and the company would give the FBI evidence to help nail other companies. But the government was getting much better offers from the Korean and Japanese firms, so it could play harder ball with ADM. It wanted a fine of $125 million, ADM cooperation, and a chance to go after Dwayne Andreas, James Randall, Michael Andreas, and Terrance Wilson. ADM balked at that. The final agreement involved an ADM guilty plea for fixing prices of citric acid and lysine, a $100 million fine, and immunity for Dwayne Andreas and Randall. The high-fructose-corn-syrup case would be dropped.
In Rats in the Grain, Lieber lists the holes in the deal. It didn’t require ADM to pay restitution to the victims of its price-fixing; the tapes Whitacre had made would not be released under the Freedom of Information Act; and neither Randall nor Dwayne Andreas would be required to submit to interviews by the Justice Department. “If Justice made a deal not to interview the leaders of a motorcycle gang under investigation, there would be a congressional probe,” Lieber notes in a letter published in the April 27, 2001, issue of A.V. Krebs’s on-line anticorporate newsletter, the “Agribusiness Examiner.” “That’s not likely in this case since ADM and the Andreases have done a masterful job of taking care of the politicians on both sides of the aisle in Washington.”
In a spring 1999 public hearing covered by Lieber, it also appeared that ADM hadn’t been barred from continuing to do business with the U.S. Department of Agriculture, where it was still making sales to the tune of $83.5 million a year. This was in striking contrast to the fate of other businesses convicted of similar crimes, and certainly made its $100-million fine look smaller.
Whitacre’s fraud case came up in 1997. All along he’d insisted that appearances were deceiving. The money he supposedly embezzled, he said, was really under-the-table company bonuses given to all ADM executives as a matter of course. The FBI looked for evidence to support his claim and found none, and Whitacre never pursued it seriously in court. Instead, he pleaded guilty in federal court in Urbana to 37 felonies growing out of his embezzlements. Judge Harold Baker was scathing on March 5, 1997, as he sentenced Whitacre to pay more than $11 million dollars restitution and serve nine years in prison: “The usual felon is a byproduct of Jim Crowism, segregation, and our society’s chemical dependency…. Mr. Whitacre…had every opportunity for success and capitalized on those opportunities. He has a PhD, a JD and an MBA. His success was meteoric….But interlaced with his success is a tale of mendacity, deceit, coercion, and theft. His crimes flowed from garden variety venality and greed.”
No one from the antitrust case spoke on his behalf or explained how Whitacre had been indispensable to the FBI’s landmark case. Lieber argues that such testimony might have persuaded the judge to cut Whitacre’s sentence in half, but the separation between the fraud and antitrust cases prevented it. As it turns out, Whitacre is now serving more time than Michael Andreas and Terrance Wilson combined.
Finally, in July 1998, Andreas, Wilson, and Whitacre went on trial for fixing lysine prices. Whitacre chose to be tried in absentia rather than endure Cook County Jail, and he presented little defense. Andreas and Wilson argued that ADM’s entry into the lysine business had in fact lowered prices from the $3 per pound the Asians had been charging to $1.10 a pound–so what was the harm? Their argument failed, since conspiring to rig the market is against the law even if the conspiracy happens not to be effective–much as conspiring to kill someone is a crime even when the hit isn’t carried out. (And of course competition had once driven the price to 58 cents a pound.)
The executives were convicted and their convictions upheld. Ultimately Michael Andreas was sentenced to three years, Wilson to two years and nine months, and Whitacre to four years and two months, part of which was to be served concurrently with his nine-year fraud sentence. Dwayne Andreas apologized to his shareholders at their annual meeting, retired as ADM chairman and CEO, and was replaced by his nephew G. Allen Andreas.
Case closed. Or is it?
If ADM had just added pennies to the price of a commodity that few Americans have heard of and even fewer have knowingly purchased, this case might well stay closed. But Mark Whitacre’s unique mix of greed, folly, and principle have given us a unique peephole into the world of a modern corporate aristocracy. It’s not a pretty picture. Eichenwald explains that Whitacre’s revelations were like a single falling domino that toppled many others: “ADM evidence of price-fixing in the citric-acid market led to guilty pleas from numerous multinational corporations–including giants like Hoffman-LaRoche and an affiliate of Bayer AG–which had participated in the conspiracies. That, in turn, indirectly helped provide evidence used in a criminal investigation of price-fixing in the huge multibillion-dollar market for vitamins…. Eventually, about thirty different grand juries investigated price-fixing in almost every corner of the food and feed industry; by 1999, the government had obtained more than $1 billion in fines….It has become apparent that price-fixing was a workaday endeavor around the globe, involving scores of corporations and executives.” Yet the only person who blew the whistle on it, for a complicated mix of reasons, was Whitacre.
So it seems a bit odd that Whitacre has ended up serving more time than Michael Andreas and Terrance Wilson, who masterminded the price-fixing scheme. It also seems odd that the FBI didn’t go after Dwayne Andreas as hard as they might have gone after a similarly placed person named Dwayne Jones. It also seems odd that ADM was able to finger Whitacre for fraud in a matter of weeks after learning he was a key witness against the company, though the company had supposedly been unaware of it for years. (In a 1996 interview, Dwayne Andreas told the Washington Post that he knew of Whitacre’s embezzlement all along, which is even more puzzling.) And it seems odd that ADM was allowed to continue doing business with the U.S. Department of Agriculture.
These oddities and others cause Lieber to toy with the theory that Whitacre was set up. In its most developed form, this theory has it that Whitacre’s embezzlements really were, as Whitacre said, company-approved bonuses paid under the table–but they were like a lead parachute, something that could be used to discredit a rogue executive if need be. That’s why, the theory goes, the company discovered them so fast once it found out Whitacre was a mole. When that discovery failed to derail the price-fixing prosecution, the theory postulates, ADM applied pressure to the Clinton administration–itself no model of probity–to separate the fraud and price-fixing cases, making it more likely that the whistle-blower would be singled out for more severe punishment than the architects of the crime and making it less likely that Whitacre would get public sympathy or judicial leniency at sentencing time. At the end of the road, according to this theory, ADM would still suffer serious damage, but Whitacre’s disparate punishment might deter any future nervous executive from going to the feds.
Unlike the price-fixing conspiracy, this wider-conspiracy theory rests on scanty circumstantial evidence. According to Eichenwald’s account, FBI agents and prosecutors couldn’t believe the under-the-table bonus theory, in part because it would have entailed ADM’s taking the absurd risk of wiring illegal bonuses to its executives through third parties who didn’t work for the company. So this conspiracy theory depends entirely on Whitacre’s credibility, which is so abysmal even Lieber can’t help but doubt him in the end.
The oddities, however, remain. Few criminals are ever punished for all of their crimes, but it cries out for explanation why Whitacre is being punished for so many of his while ADM’s price-fixing masterminds got off relatively easy. If Mark Whitacre belongs in jail–and surely he does–then why don’t Michael Andreas and Terrance Wilson belong there much longer?
The Informant: A True Story by Kurt Eichenwald, Broadway Books, $26
Rats in the Grain: The Dirty Tricks and Trials of Archer Daniels Midland by James Lieber, Four Walls Eight Windows, $26.
Art accompanying story in printed newspaper (not available in this archive): illustration/Mark S. Fisher.