THE CHICAGO COMMODITIES PROBE : The Cover : Agents in Sting Learned Vital Skills at ADM

The huge grain processing conglomerate, Archer Daniels Midland, disclosed Friday that it employed two FBI agents assigned to undercover duty in the commodities investigation--and trained them as traders.

Richard Burket, a spokesman for ADM in Decatur, Ill., refused to say whether the company knew that the two--Richard Carlson and Michael McLoughlin--were FBI agents when it hired them.

But a source close to the government’s investigation said that ADM was “involved early and cooperated extensively” with the probe. “They provided a cover and training for two agents,” the source added.

For a team of FBI agents to penetrate the dizzy whirl of shouted orders and hand signal bids on the Chicago Board of Trade and the Chicago Mercantile Exchange, they had to know what they were doing or risk losing hundreds of thousands of dollars in taxpayers’ money in their elaborate sting operation.

Using the busy trading offices of ADM’s commodities trading subsidiary, ADM Investor Services, on the 16th floor of the Chicago Board of Trade building in the heart of Chicago’s financial district as their base, both Carlson and McLoughlin worked as low-level trainees, acting for a time as “floor runners” or clerks until they understood enough about the business to strike out on their own.

Began in 1986

Burket says that both men left ADM Investor Services more than a year ago, adding that neither man “worked for the company for very long.”

The FBI’s investigation began about three years ago, with undercover work beginning in 1986.

After leaving ADM, both Carlson and McLoughlin set up shop as independent commodity traders, with Carlson working mainly in the Board of Trade’s soybean pit and McLoughlin in the bond trading area. For someone trained at ADM, soybeans made sense; ADM is the largest processor of soybeans in the world.

Once inside the trading arena, the agents apparently blended in with the real traders with relative ease. Most of the actual trading on the exchange floor on the Board of Trade is handled by independent traders who come and go.

Traders and clerks interviewed Friday at the Board of Trade said it is impossible to know everyone in the crowded pits. Often people are known only by the badges and jackets each trader must wear on the exchange floor. In fact, several floor runners and traders Friday found it difficult to remember what the short and stocky Carlson looked like.

One former prosecutor familiar with the investigation said that it was unlikely that Carlson, McLoughlin or the other undercover agents were actually executing trades for real customers, since that could have left the government open to lawsuits from investors involved in the transactions. The agents may have limited their activity to trades among themselves or with trading partners aware of their undercover activity. One source said Carlson was rarely involved in major transactions, and was more likely to be observing the trading pit from the sidelines.

Rapid Rise Undetected

In hindsight, some workers on the trading floor said that the agents’ quick rise from clerical help to wealthy traders--owning at least one seat on the Board of Trade and two others on the Chicago Mercantile Exchange worth hundreds of thousands of dollars apiece--should have raised suspicions.

“I don’t know why nobody got suspicious of Carlson,” said one floor runner at the Sign of the Trader, a bar in the lobby of the Board of Trade Building. “You don’t go from being a floor runner to having a $400,000 badge.”

As a giant in the soybean trading arena, ADM may have had an incentive to cooperate with the federal investigators to ensure the integrity of the soybean market. But one source denied that ADM went to the FBI with information that prompted the agency to begin its undercover work.

Political Connections

FBI officials in Chicago refused to comment on the investigation.

ADM’s chairman, Dwayne Andreas, is extremely well-connected politically, both in Washington and abroad. Presiding over a $7-billion agribusiness conglomerate that exports grain throughout the world has helped Andreas foster close friendships with both President Reagan and Soviet leader Mikhail S. Gorbachev; on Friday, Andreas was thought to be attending the inauguration of President Bush. Although it isn’t certain whether Andreas worked with the Justice Department to bring the federal investigators into ADM, one source said that the “knowledge and cooperation went up very high in the company.”

Burket, the ADM spokesman, said Andreas was unavailable for comment on the investigation.

Times Staff Writers Ronald J. Ostrow and Douglas Frantz contributed to this article.