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ADM Indictments Could Come This Week

Agriculture: Federal charges would allege price-fixing in the lucrative lysine feed-supplement market.

September 16, 1996|From Associated Press

After years of cultivating their price-fixing case against agribusiness giant Archer-Daniels-Midland, federal prosecutors may be ready this week to reap a harvest of high-profile indictments against the company.

Although Justice Department officials won't confirm it, a source close to the case and several published reports say ADM and two top executives could face criminal charges as early as Tuesday. Negotiations for possible plea-bargains continue, however, the New York Times and Chicago Tribune reported last week.

The most likely charges would accuse Decatur, Ill.-based ADM of fixing prices in the lucrative market for lysine, a high-tech livestock-feed supplement made from corn.

ADM's three main competitors in the multimillion-dollar lysine market and a top executive from each of those firms have agreed to plead guilty or no contest to price-fixing. All six are scheduled to enter pleas Thursday before U.S. District Judge Ruben Castillo in Chicago.

Guilty pleas or convictions could mean jail time for ADM executives and hundreds of millions of dollars in fines for the company. But the self-styled "supermarket to the world" should not suffer much in the long run, analysts say.

"Hundreds of millions of dollars will not affect ADM when they have billions of dollars," said George Dahlman of Piper, Jaffray & Hopwood Inc. in Minneapolis.

News reports have said prosecutors plan to seek charges against Michael Andreas, ADM's vice chairman and the son of chairman Dwayne Andreas, and Terrence Wilson, head of ADM's corn-processing division. Lawyers for the two men did not return telephone calls seeking comment.

ADM spokeswoman Karla Miller declined to comment.

A source close to the case alleges that Michael Andreas and Wilson attended several meetings with competitors where price-fixing was discussed. Those meetings were taped by Mark Whitacre, a former head of ADM's BioProducts division who worked as a mole for the FBI.

ADM fired Whitacre last year, shortly after FBI agents raided the company and took thousands of pages of documents. ADM accused Whitacre of embezzling millions; Whitacre says the money was under-the-table compensation common for top ADM executives.

Whitacre has agreed to plead guilty to shareholder fraud and tax evasion in connection with the payments, a source said.

Any negotiations for a plea-bargain by ADM would be complicated by the fact that the company's three main rivals have already made deals with prosecutors.

Japan's Ajinomoto Co. and Kyowa Hakko Kogyo Co. agreed to pay fines of at least $10 million each, although Castillo could order higher fines. The judge will determine the fine against Sewon America Inc. of New Jersey, a subsidiary of Sewon Co. of Seoul.

Former Justice Department lawyers say the government always offers better terms to those who plead guilty first. That means ADM could be socked with high fines and that Andreas and Wilson could face jail time even if they plead guilty.

Although fines in price-fixing cases have been increasing over the last decade, the penalties are seldom large enough to hurt, said University of Cincinnati economist Joseph Gallo, who studies the issue.

Still, the prospect of millions of dollars in legal bills on top of possible criminal fines could prompt the company to seek a settlement, said Leonard Teitelbaum of Merrill Lynch Capital Markets Inc. "They're not calling 1-800-LAWYERS," he said. "I'm sure they're spending a lot on legal fees, and that will affect their decision on this."

ADM also faces a flurry of civil lawsuits from disgruntled investors and unhappy customers accusing the company of fixing prices for lysine, citric acid and high-fructose corn syrup. ADM agreed to pay $25 million to settle many of the lysine civil lawsuits, although several large lysine customers are pursuing separate suits.

Lawyers opposing the lysine settlement presented a study by a Purdue University economist estimating the cost to customers of the alleged price-fixing at up to $180 million. If accurate, that means ADM could be forced to pay up to three times that if it loses the case.

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