ADM Agrees to Pay U.S. $100 Million to Settle Price-Fixing Case
Archer-Daniels-Midland Co. said Monday that it has agreed to pay $100 million, the largest criminal antitrust fine in history, to the U.S. Treasury and to plead guilty to fixing the prices of two little-known ingredients that are widely used in modern food production.
The agreement marks the culmination of a global four-year Justice Department investigation into ADM, a giant agricultural company that has come to represent America’s contribution to feeding the masses by billing itself as the “Supermarket to the World.”
As part of the investigation, a top executive in the company tape-recorded conversations for the FBI, and the Justice Department mobilized dozens of investigators worldwide. The probe reached from the headquarters of the giant grain company in Decatur, Ill., to the Cayman Islands and beyond.
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The agreement will resolve all pending criminal investigations of the company by the government, the company said. But the plea agreement is by no means the final chapter in the ADM affair. Two of the company’s senior executives are still grand jury targets, according to the company. One of the targets is Terrance Wilson, 59, the head of ADM’s corn-processing division. But the central figure is Michael D. Andreas, 47, the company’s vice chairman and once heir apparent to his father, company chairman and powerful political insider Dwayne O. Andreas, who has contributed millions of dollars to Republicans and Democrats alike and has cultivated foreign heads of state in his worldwide travels.
Several large institutional investors Monday called for the resignation of Dwayne Andreas, 78, who has ruled the company with an iron hand for nearly 26 years. Dwayne Andreas is not a target of the investigation.
“Dwayne, obviously, should go,” said Patricia Macht, spokesman for the California Public Employees’ Retirement System, or CalPERS, which holds 3.6 million shares of ADM stock. “It’s a lot like an apple: If it’s blemished on the outside, it’s rotten at the core.”
ADM did not comment about suggestions of such changes at the $13.3-billion company, which several critics have said has been run like a family fiefdom by the elder Andreas and a board consisting of his friends or relatives.
ADM’s products, from ethanol for automotive fuel to additives for animal feed and syrup for soft drinks, are ubiquitous. Food products that use one or more ingredients from ADM include Doritos corn snacks, SnackWells cookies, Coca-Cola, Kellogg’s Pop-Tarts, Ragu spaghetti sauce, Hamburger Helper and Premium Saltines. The company has more processing capacity than any agricultural company in the world.
Several antitrust experts said they are startled that the company agreed to such a large fine while two of its top executives are still in the Justice Department’s sights. But criminal defense attorneys not involved in the case said the company had little choice. The government’s evidence included not only tape recordings of international meetings with ADM’s competitors during which prices and volumes of the products were set, but in addition, two international competitors recently pleaded guilty to price fixing and agreed to cooperate in the case--giving the government both the tapes and the co-conspirators in the crime.
An attorney for Michael Andreas declined to comment on the case.
“I believe that when the dust settles, it will be clear that ADM and my client tried to bust open these international cartels, not fix them, and, in the process, saved American consumers millions,” said Reid Weingarten, an attorney for Wilson, one of the government’s remaining target.
The fate of the government’s mole, Mark Whitacre, is still to be determined. After ADM found that Whitacre, a top executive in its bio-products division, had taped hundreds of meetings with ADM executives, including Michael Andreas and Wilson, and the company’s competitors, it accused Whitacre of embezzling $9 million from the company. The Justice Department began a separate investigation of Whitacre, who is expected to plead guilty to tax evasion and shareholder fraud soon.
Justice officials declined to comment on ADM’s announcement, which came on a day when federal offices were closed for the Columbus Day holiday. But sources close to the case said the Justice Department should consider the agreement--which will be filed in a Chicago federal court today for its approval--a victory.
“It’s a significant milestone for the Justice Department,” said Mark Gidley, a Washington antitrust attorney. “It’s a whole new plateau for antitrust cases.”
The largest fine the Justice Department had previously leveled was for $15 million last year in a commercial explosives price-fixing case.
The antitrust probe concentrated on whether ADM had illegally agreed to set certain prices and volumes for three major products made by the firm and distributed internationally. One of the products is lysine, an animal feed additive that spurs the growth of poultry and pigs, and another is citric acid, a food additive that is used in soft drinks and as a preservative in prepared foods. ADM will pay a fine of $70 million for lysine and $30 million for citric acid. In addition, the company had previously settled civil lawsuits brought by the company’s customers for $90 million.
As part of the criminal deal, the Justice Department will not pursue charges that the company fixed prices in the third product, high-fructose corn syrup, a sweetener used in soft drinks such as Coke and Pepsi.
Because ADM supplies ingredients that are only one part of a final consumer product--whether soft drinks or chicken legs--it is difficult to determine what effect, if any, the settlement will have on consumer prices, said Tom Pirko, president of BevMark Inc., a New York beverage consulting firm. But consumers will ultimately benefit from the message that the government will not tolerate companies that conspire to fix prices, he said.
Corporate experts and Wall Street seemed to agree that ADM’s deal was a good one for the company. The $100-million fine, while a record, will hardly make a dent in the bottom line of ADM, which had $13.3 billion in sales this year, they said. The company’s stock was up to a 52-week high following Monday’s announcement, closing at $21.75, up $1.125 on the New York Stock Exchange.. The fine represents a cost of less than 19 cents a share, according to several experts.
