7th Circuit Castigates ADM Execs

Charging that "the facts involved in this case reflect an inexplicable lack of business ethics and an atmosphere of general lawlessness that infected the very heart of one of America's leading corporate citizens," the 7th Circuit US Court of Appeals affirmed June 26 the convictions of Michael D. Andreas and Terrance Wilson, two former Archer Daniels Midland Co. (ADM) executives currently serving two-year prison terms and ordered them resentenced to lengthier prison terms.

"Top executives at ADM and its Asian co-conspirators throughout the early 1990s 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," said the opinion by Judges Michael S. Kanne, Ilana Diamond Rovner and Terence T. Evans.

After ADM ("Supermarkup to the World") pleaded guilty to antitrust charges in 1996 and paid a then-record $100 million fine a federal jury in September 1998 convicted Andreas and Wilson as well as ex-FBI mole Mark Whitacre of rigging the price of the livestock feed additive lysine in a world-wide global conspiracy.

In appealing Andreas and Wilson's conviction their lawyers argued that the two were allocating sales volumes, not fixing prices, but the Circuit Court of Appeals uncommon 62-page judgement said that the executives had conspired to limit producers' output in order to raise prices. The appeals court also found that US District Judge Blanche Manning, who presided over the two-month trial, erred in not stiffening the two executives' sentences for their leadership roles in the conspiracy.

Judge Manning had ruled that Andreas and Wilson weren't responsible for the conduct of other conspirators, despite the government's contention that the two executives had masterminded the scheme and Wilson directed the Asians in how to carry it out. The appeals court agreed, calling Andreas "the ultimate leader of the price-fixing cabal" and concluding that ADM "suggested the scheme, planned it and carried it out."

At the outset of their decision the appeals court duly noted that "for many years, Archer Daniels Midland Co.'s philosophy of customer relations could be summed up by a quote from former ADM President James Randall: 'Our competitors are our friends. Our customers are the enemy.' This motto animated the company's business dealings and ultimately led to blatant violations of US antitrust law, a guilty plea and a staggering criminal fine against the company. It also led to the criminal charges against three top ADM executives that are the subject of this appeal."

The decision also noted that "ADM, the self-professed 'supermarket to the world,' is a behemoth in its industry with global sales of $14 billion in 1999 and 23,000 employees. Its concerns include nearly every farm commodity, such as corn, soybeans and wheat, but also the processing of commodities into such products as fuel ethanol, high-fructose sweeteners, feed additives and various types of seed oils. ADM has a worldwide sales force and a global transportation network involving thousands of rail lines, barges and trucks. The company is publicly held and listed on the New York Stock Exchange.

"The Andreas family has long controlled ADM. Dwayne Andreas is a director and the former CEO, G. Allen Andreas is the board chairman and president, and various other family members occupy other executive positions. Michael D. Andreas, commonly called `Mick,' was vice chairman of the board of directors and executive vice president of sales and marketing. Wilson was president of the corn processing division and reported directly to Michael Andreas.

"ADM's market power gave Andreas the ability to coerce the other cartel members into submission, and the evidence is clear that he used that power to lead the conspiracy," the court said. It said the fact that his power was not absolute "does not negate the conclusion that Andreas was the ultimate leader of the price-fixing cabal."

Wilson, the opinion added, also played a leadership role. "He appears on countless tapes proposing ways to run the cartel and ways to make it more efficient."

Meat/Poultry Inspection 'Inadequate'

Two major recalls recently of ground beef for suspected E.coli poisoning, in both cases involving IBP Inc., the nation's largest beef packing company, came on the heels of a USDA's Inspector General Roger Viadero's investigation that the nation's new meat and poultry inspection system is inadequate to protect consumers,

Viadero's study reported examples of filthy plant conditions, rodent droppings on or near products, and plants being allowed to operate after repeated food safety violations and that the meat and poultry safety system started four years ago shifting many inspection duties from federal to plant employees is not ensuring that the companies are complying with food safety standards.

While the Inspector General's Office, an independent investigative division within the Department of Agriculture, report noted that USDA's switch to a science-based inspection system four years ago is improving meat safety, the agency has "reduced its oversight beyond what was prudent and necessary for the protection of the consumer," and should require processors to do more testing for deadly microbes.

Meanwhile, two days after the Inspector General's report (June 23) IBP Inc. recalled more than 200 tons of ground beef from grocery store shelves across the United States and Canada, fearing contamination by the deadly E. coli bacteria. The following day a Canadian packing plant of IBP Inc. voluntarily recalled 46,000 pounds of ground beef products because of possible contamination with E. coli, the second E. coli recall in two days for the U.S.'s largest beef processor. E. coli 0157:H7 is a deadly form of a common bacteria found in the intestines of humans and animals. It attacks the lining of the intestines before damaging the kidneys, possibly leading to kidney failure and death.

IBP Inc., the US's number one meat packing company and often referred to as the nation's number one "corporate outlaw," recently announced that it is unveiling Thomas E. Wilson (TM) as the name of its own new consumer brand.

The recall of ground beef, produced in May at its packing plants in Geneseo, Illinois, and Alberta, Canada, from distributors and retailers in 25 states and at least five Canadian provinces after the bacteria was found in samples, was voluntary.

Government inspection agencies on both sides of the border and the Dakota Dunes, South Dakota-based company stressed that no illnesses associated with the meat had been reported, and urged the public not to panic. IBP said the product would pose no danger to consumers as long as the beef was properly handled and cooked to an internal temperature of 160 degrees Fahrenheit.

In the US, wholesalers, distributors and a small number of retailers that received the affected ground beef were located in Kansas, Texas, Minnesota, Maine, Missouri, Pennsylvania, Kentucky, Arkansas, South Carolina, Florida, Georgia, Iowa, Indiana, Wisconsin, Tennessee, Maryland, Oklahoma, Nebraska, New York, Virginia, North Carolina, Alabama, Ohio, Illinois and Mississippi.

Regarding the recall, USDA's Food Safety and Inspection Service said IBP-Lakeside Packers in Brooks, Alberta, produced the products May 31 and shipped them to Kansas, Kentucky and Tennessee, as well as to locations in Canada. In a release, the Lakeside plant said most of the beef was to have been processed by grocers or restaurants before being sold to consumers, which means no brand names or product codes are available for home checks.

Previous to the IBP recalls in Nebraska, Del Gould Meat, Inc. of Lincoln voluntarily recalled more than three tons of its ground beef products -- Del Gould brand Ground Beef Patties, Beef Patty Mix and Ground Beef -- that may have been tainted with E. coli, the US Department of Agriculture reported. The ground beef products were produced on June 2, June 5 and June 6 and distributed to restaurants, bars and cafes in southeast Nebraska and southwest Iowa. Larry Feerhusen, president of Del Gould Meats, told the Lincoln Journal Star he suspected all but 200 pounds of the recalled beef had been consumed. He would not identify which restaurants received the meat or the three meatpackers that could have supplied it.

The latest two US and Canadian recalls adds to a long list of recent IBP meat recalls. In February, 1999 IBP, the nation's most profitable meat packer, had to "voluntarily" recall 10,000 pounds of wholesale ground beef following reports that it contained small particles of glass. In October, 1998 IBP recalled beef because of possible E. coli contamination and earlier in April recalled a meat shipment after a single package produced at a plant in Joslin, Illinois, contained the virulent strain of the bacteria.

The previous August the nation learned of the recall of 25 million pounds of Hudson Foods ground beef after 16 people in Colorado fell ill after eating patties tainted with E. coli 0157:H7. Then came the news that IBP had bought the Hudson Foods state-of-the-art Columbus, Nebraska plant. One of Hudson's suppliers had been IBP. Later, coincidently, after South Korea discovered E coli in a shipment of IBP beef, IBP was banned by South Korea from shipping meat to that country; the US's third largest beef export account.

And, after Swiss health inspectors last July discovered imported US beef was contaminated with DES, an illegal hormone, Switzerland barred further imports from Farmland National Beef Packing Co., a unit of Farmland Industries, and the Bruss Co., a subsidiary of IBP Inc.

Perdue Demands Binding Arbitration in Contracts

Perdue Farms Inc. has been holding meetings with its poultry farmers who grow chickens for the DeFuniak Springs, Florida, complex to explain why they are canceling all of the present contracts as of July 1 and offering one that includes a controversial arbitration clause as the company's final dispute resolution method.

Growers attending the meetings report that the hurried action to force them to sign the new contract was explained as an attempt to halt future lawsuits such as one being pursued by "former growers" from the complex. A lawsuit has been filed against Perdue Farms by former growers Brenda and Eddie Tinsley and Bob Williams of the DeFuniak Springs complex.

Paralleling the abusive ConAgra contract demands of four years ago in the same Alabama area which resulted in a protest by growers over the loss of their right to a trial by jury, the new Perdue contract would make arbitration results binding upon both parties and "the final means of resolving all complaints."

The new contract also offers growers a one-tenth of a cent base pay raise for tunnel-ventilated houses (from 3.6 cents to 3.7 cents per pound of poultry returned to the processing plant) and a raise from 3.5 cents to 3.6 cents/lb for non-tunnel houses. The minimum payment per pound will be 2.8 cents/lb for tunnel houses and 2.7 cents/lb for non-tunnel houses.

Along with the slight raise, Perdue is taking away the utility payment that helped with the growers' electricity and gas bills. Under the new contract, the growers will pay for their own electricity bills and the first tank of brooder gas. After that, Perdue will pay for any further gas needs and make that cost part of the total cost of producing birds on a particular farm.

Perdue has lost in recent decisions concerning the Tinsley, Williams v. Perdue case from the State of Alabama Supreme Court and Federal Court. The Alabama Supreme Court decided in favor of allowing the poultry growers to refuse to turn over names of grower members in the state and national grower associations, and instead, required Perdue Farms to turn over the names and addresses of all of the poultry growers in the DeFuniak Springs complex to the Tinsley, Williams' attorneys.

A Federal Court recently ruled that Perdue Farms must turn over to the grower attorneys the names of all of their employees and all of their contract laborers with clear descriptions of their relationship to the company.

The Tinsley, Williams case charges Perdue Farms Inc. with actively participating in practices to "deceive, manipulate, under-pay and mislead the plaintiffs"; instituting arbitrary requirements "for upgrades to Plaintiff's property to impede the sale of the property"; manipulating "weights and measures shown on Plaintiffs' settlement sheets in order to pay them less than what was owed to them"; selectively placing genetically poorer birds with Plaintiffs so that they were "at a perpetual competitive disadvantage" with the other growers; breach of contract; and conspiracy to do the above mentioned acts.

A.V. Krebs is director of the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, Washington 98203-0201; (

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