An article in the Oct. 14 New York Times, "New Concerns Rise on Keeping Track of Modified Corn," by Kurt Eichenwald raises new questions not only about Eichenwald's association with Archer Daniels Midland (ADM), but also the possibility of a new chapter in that company's continuing model of a corporate culture of corruption and manipulation, a story which James B. Lieber, has described so vividly in his authoritative book, Rats in the Grain.
Kurt Eichenwald has written a number of stories in recent years in the Times concerning the scandal at ADM where the "Supermarkup to the World" pled guilty to price fixing in the world lysine feed additive market and paid $100 million fine and saw three of its executives convicted of price fixing, fined and sent to jail.
Eichenwald critics say that they believe he wrote stories on the ADM scandal for the Times rather than reported on the scandal, because as his latest book, The Informant, published by Doubleday, illustrates his role as a reporter for the "paper of record" leaves a lot to be desired.
Those who have closely covered the ADM scandal over recent years have been voicing serious questions about Eichenwald's reporting skills as opposed to his story telling. They note that many details in his book are erroneous, and that he makes no mention, either in his Times stories or the book, of many aspects of the coverup of the scandal by the Department of Justice. Nor does he discuss the influence peddling role of Williams & Connelly, the high-powered law firm in Washington which not only represented ADM in the price fixing scandal and argued Bill Clinton's defense against impeachment on the floor of the US Senate, but also represented Fox Television in its legal battle with Florida reporters Jane Akre and Steve Wilson after they were fired in 1997 for refusing to lie, distort and slant an on-the-air report on the use and dangers of the bovine growth hormone rBGH. [See Dispatches, page 15.]
Eichenwald's continued coziness with the Department of Justice and Williams & Connelly is troubling to critics when one considers the fact that while he was writing about the ADM scandal he reportedly told David Hoech of the ADM Stockholders Watch Committee that he controlled what was printed in the Times concerning Archer Daniels Midland.
Now comes his article in the Times on genetically engineered corn.
ADM is currently the nation's leading corn processor, with elevators scattered all over the nation and the world. It boasts of numerous food products which we buy every day which contain its ingredients.
Eichenwald in his story relates certain details concerning the growing scandal of the genetically engineered corn seed StarLink, which is not fit for, nor has it been approved for, human consumption.
He writes: "Millions of bushels of the unapproved corn, known as StarLink, have been found in flour delivered to more than 350 grain elevators around the country."
He goes on to tell that "StarLink corn was first found last month in store-bought taco shells distributed under the Taco Bell brand by Kraft Foods, which issued a nationwide recall. On Wednesday, a similar finding was made in house-brand taco shells sold by the Safeway supermarket chain. The two products were made of yellow corn from the same mill, run by Azteca Milling in Plainview, Tex.
"Yesterday, Mission Foods, which produced the Safeway shells, announced a recall of all its tortilla products made with yellow corn on the chance that some might contain StarLink corn. The company, a subsidiary of the Gruma Group of Mexico, which is based in Irving, Tex., sells products under the Mission name as well as numerous private-label brands. ...
"Azteca Milling, also a Gruma subsidiary based in Irving, announced its own voluntary recall of all yellow corn flour yesterday. Dan Lynn, the company's president, said it would mill only white corn because that was the 'surest way to bolster confidence' that no corn unapproved for human consumption had entered the food chain."
What Eichenwald does NOT report in his story is that the company Gruma Group of Mexico is a joint venture with Archer Daniels Midland, whose mills located in Texas ground the corn used to produce the taco shells.
Curiously, Eichenwald also infers in his story that it is the responsibility of the farmer and Adventis, the seed's manufacturer, to guarantee the quality and safety of food ingredients, rather than the responsibility of the food processor to test all ingredients used in preparation of its product to insure its quality and insure food security.
The fact that suddenly a story on serious questions surrounding the contamination of genetically engineered corn products appears in the New York Times ("All the news that's fit to print") under Eichenwald's byline raises some troubling questions. Troubling because Eichenwald has claimed that he controls what is printed in the Times concerning ADM, the nation's number one corn processor and a party to a joint venture where such contaminated corn has already been found, and yet no mention of ADM is made in his story.
But the StarLink contamination has also raised other questions relative to ADM's role in this latest scandal. One long-time ADM critic Nick Hollis of the Agribusiness Council, poses a rather thoughtful question in that regard.
Could ADM, as the nation's largest corn processor, Hollis asks, "be using its 'inside info' on which food processors are receiving the tainted flour (from their milling operations) to 'plant problems' and sabotage the food from certain companies which had stood up to them several years ago during the civil phase of the pricefixing case on lysine?"
Hollis notes that Kraft Foods was one of the biggest "holdouts" in the civil case, requesting more damages from ADM as a result of price fixing. Kraft had led a group of dissenting companies, including Hudson Foods and others in the "holdouts" column. As a result, they did receive more settlement money.
"While this was underway," he adds, "a story broke in November 1997 in the Chicago Tribune, by Nancy Milman, which pointed out Kraft's efforts to get the US Department of Justice action surrounding allegations that Dwayne Andreas himself had used coercion and bribes to derail a cooperative from building a high-fructose corn syrup facility in North Dakota (which would have supplied Kraft).
"This story dried up as key witnesses suddenly refused to talk about their meeting with Dwayne. If you look carefully at Aventis, a key focus of the corn shell recall, you may find a similar disturbing pattern since just a few days ago, this company was mentioned within a larger group of firms settling a civil suit on price fixing of vitamins.
"Many observers believe that ADM and its partner, Rhone Poulenc, were provided a 'pass' from prosecution in the vitamin price-fixing scandal which rocked European firms, because the Decatur-based firm had been caught on tape and agreed to cooperate with the DOJ -- the same tapes which incriminated them on lysine may also have yielded additional information on other criminal cartels they were involved in," Hollis speculates.
For additional details on the Agribusiness Council, its activities and commentary on the ADM scandal see (www.agribusinesscouncil.org).
"Minority shareholders are coming to the conclusion that this is a rip-off," Paul Korngiebel, a Brandes Investment Partners L.P. of San Diego portfolio manager declared last week. Noting that ADM will be able to sell some of its shares back to IBP and at the same time increase its stake in the company if it goes private, Korngiebel said such "special treatment lends a pungent odor to the transaction."
Brandes Investment Partners, with 9% of IBP stock, is its second-largest holder after ADM, which is part of a buyout group headed by Donaldson, Lufkin & Jenrette Inc. (DLJ), the merchant-banking fund that recently announced it has offered a bid of $22.25 a share, or $3.8 billion, including $1.4 billion of debt, to buy the nation's largest meat packing company.
"I haven't found anyone who likes this price from a shareholder point of view," Tim Drake, an analyst for Banc One Investment Management, which holds about 1.4 million IBP shares, told Dow Jones Newswires' Richard Gibson. "At a minimum the mid-20s is what we'd be looking for," he said.
"I've spoken on an individual basis to 35%-plus of the equity, excluding ADM, and there seems to be not just faint grumblings of disapproval but some pretty strong statements that $22 is not just light, but that the process at which it was arrived at is patently unfair," added Korngiebel.
Given the apparent breadth of shareholder unhappiness, Korngiebel said, "It's far from a slam-dunk that they can get the deal done at $22.25," promising that "we at Brandes will certainly vote 'No'."
Concern by employees with IBP has also been apparent to such a degree that they may join institutional investors in rejecting the buyup plan. "There are a lot of guys who have been there for a long time, saved the stock, and will get hit very hard," one Sioux City stockbroker said. A number acquired options priced above $22.25, so would be "out of the money" and the options worthless, he said.
Acknowledging those concerns, IBP recently issued employees a special edition of its in-house newspaper, Communicator, a copy of which was obtained by Dow Jones. The publication offers "responses to some of the many questions employees have been asking" about the pending acquisition, including those about stock options.
"Unfortunately, there will be no equity or value in options with a grant price higher than the $22.25 acquisition price. They will be canceled as of the effective date of the merger," which it says is likely to be sometime next January.
"You will not be able to carry your options over into the new company," the publication advised its readers, promising that after the merger there will be a compensation plan to replace the stock option plan, but added, "the details have not yet been defined."
Numerous employees at IBP, including those at the foreman level, are eligible for stock options, according to people familiar with the company's compensation structure.
The newsletter also states part of management's reasoning behind accepting the DLJ-led bid. "Our company is changing. We are becoming a much more diversified company and we believe the transition from meatpacker to food company can be accomplished more easily as a privately held operation," it says.
"Private companies do not have to deal with the pressure of making business decisions based upon Wall Street analysts expectations. Instead, they can focus more intently on working for the long-term growth of the company," the publication continued.
In recent months IBP, which has been branded the "nation's number one corporate outlaw," has been investing heavily in the ability to produce what are known as case-ready meats under its new label Thomas E. Wilson meats. The cuts go directly from packing house to meat counter and don't require a supermarket butcher to modify and wrap.
IBP has said shareholders will be asked to vote on the DLJ offer sometime in the next 60-90 days; however, some analysts speculate that the deal has a 50-50 chance of being rejected, if DLJ does not raise the bid.
Meanwhile, even though IBP Inc. was reporting that record export sales had helped third-quarter earnings easily beat expectations the company disappointed some on Wall Street by refusing to comment on its controversial pending buyout. In a post-earnings conference call, IBP Chairman and Chief Executive Robert Peterson said, "We would like very much to discuss the sale of IBP but have been advised we should not do it due to legal reasons."
A. V. Krebs operates the Corporate Agribusiness Research Project (www.ea1.com/CARP), P.O. Box 2201, Everett, Washington 98302-0201; email email@example.com.