When Americans bite into a juicy steak, cut into a birthday cake or take a dose of vitamins, chances are Archer Daniels Midland Co. had a hand in bringing those products to the market.
The Decatur, Ill.-based agriculture company processes about a third of the nation’s grain and soybeans. It operates flour mills in Spokane, Cheney and Sprague, Wash.
News that a high-ranking official of the company went undercover for the FBI in a price-fixing investigation means the “supermarket to the world” will be getting more attention than its Sunday morning news show commercials ever intended.
The investigation started in 1992 when Mark E. Whitacre went to the FBI, The Wall Street Journal reported Monday. Using a briefcase rigged with a recorder, the president of one of Archer Daniels’ most promising businesses taped meetings with other agribusiness companies in such locales as Hawaii, Tokyo and Los Angeles, the paper said.
Whitacre could not be reached for comment. Justice Department spokeswoman Gina Talamona declined to comment on the newspaper report and emphasized the agency has not even named the companies under review.
Reports of the criminal antitrust investigation, which first hit Wall Street last week before the Journal story, have shaken investors’ confidence in Archer Daniels. In just one week, the company’s stock has lost about $2 billion in value. The stock fell another $1.87-1/2 per share Monday to $15.87-1/2 on the New York Stock Exchange.
“Wall Street, as is its custom, is assuming guilty until proved innocent,” analyst John McMillin at Prudential Securities Research said.
If the government successfully prosecutes Archer Daniels or its executives, the impact also could reach as far as the Capitol Hill debates over sugar-price supports and the use of ethanol in gasoline.
The biggest surprise to followers of the company was the role of Whitacre, the quiet, fast-rising head of Archer Daniels’ bioproducts division. The Journal said he went to the FBI in 1992, a year after the federal government lost an antitrust lawsuit against Archer Daniels.
He subsequently made secret tape recordings for the probe into price-fixing for high-fructose corn syrup, lysine and citric acid, the newspaper said.
The criminal case is now before a federal grand jury in Chicago, which has seized or is seeking records from Archer Daniels, CPC International Inc.; Tate & Lyle Plc’s A.E. Staley Manufacturing Co.; and closely held Cargill Inc.
It’s almost unprecedented for an executive such as Whitacre to become a whistleblower and provide key evidence as a government informant.
“In my experience, it’s unique,” said Donald I. Baker, former head of the Justice Department’s antitrust division. “Having a guy on the fast track is very unusual.”
Archer Daniels and its chairman, Dwayne O. Andreas, have been politically influential for decades.
The company is the single largest contributor of “soft money,” money not targeted for individual contributors but to help political parties in statewide or national elections.
The company donated $1.4 million in soft contributions during the 1992 election, the largest single donor during that campaign, according to the Center For Responsive Politics, a Washington, D.C.based public-interest watchdog organization.
“When you talk about politically influential players, ADM is usually at the top of the list,” said Josh Goldstein, a researcher with the group.
The company has strong interests in maintaining close ties to regulators and legislators. As the largest agriculture company in the nation, national farm policy can have tremendous impact on the company.
Archer Daniels feeds livestock, makes flour, provides the basics for dietary supplements and produces most of the ethanol made in the United States. Its Inland Northwest mills, which operate under the Archer Daniels Modland Milling and Centennial Mills divisions, employ about 100 people who process flour for bakery mixes, bread, cookies and crackers.
But it is new products and new opportunities for old standbys that have generated the most interest for investigators.
The investigation appears to be centered on new markets for high-fructose corn syrup and new additives with uses ranging from fattening pigs to holding together soy burgers.
Fructose syrup, a cheaper form of sugar, is used in soft drinks and gum. The syrup has also found new demand in beverages such as flavored iced teas and juices, where sales are rising quickly. Archer Daniels’ biggest customers for the product are the nation’s two giant soft drink companies, Pepsico Inc. and CocaCola Corp.
There’s at least one reported casualty of the investigation. The Journal reported Monday that the investigation led to the resignation last week of Howard G. Buffett, corporate vice president and assistant to the chairman. Buffett left the company because he was troubled by the investigation and the way the company was handling it, unidentified associates told the newspaper. He could not be reached for comment.
Buffett’s father is Warren Buffett, chairman of investing company Berkshire Hathaway and by some accounts the second-richest person in the world.