Monitoring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs  Editor\Publisher
Issue #123                                                                                  July 31, 2001


Hoodwinking American farmers, the general public and the media, while plying politicians with self-serving campaign finance offerings has not only in the past been the way of doing business at Archer Daniels Midland (ADM), but true to its new slogan it is promising to be "The Nature of What's to Come," in the ethanol and the high fructose corn syrup (HFCS) industry.

Under the guise that it will help rescue a failing farm economy and specifically the nation's corn farmers the "Supermarkup to the World" has managed over the last 30 years to sell the idea that a fuel made from corn, should become a major part of the nation's energy policy.

In fact, however, there have not only been persistent doubts about its economic and environmental benefits, but many of its critics see the promotion of ethanol as simply another nefarious way to get the federal government to continuously heavily subsidize ADM, which produces some 50% of the nation's ethanol.

In recent months several events have only added fuel to such an argument, although for the most part the news media and corn farmers themselves have chosen to ignore the dire implications of such events. A quick review of those events shows how the stage is once again being set for ADM to continue to benefit handsomely from such backstage political maneuvering at a substantial cost to U.S. and Mexican farmers, to the nation's taxpayers and to the environment.

Earlier this year California's Governor Gray Davis was accused of being improperly influenced by political contributions from ADM which led to his ordering in March, 1999 refiners to stop using MTBE by 2003 because the chemical was contaminating water supplies. Canada's Methanex Corp., a major manufacturer of the fuel additive, sought $1 billion in damages for alleged violations under the North American Free Trade Agreement (NAFTA).

NAFTA prohibits unfair protection of domestic industries, and Methanex charged that U.S. officials acted improperly to protect the American ethanol industry, which competes against methanol as a gasoline additive that reduces toxic emissions.

According to Methanex, ADM officials improperly influenced Gov. Davis to ban MTBE by flying him from an appearance in Chicago to a secret meeting at the company's headquarters in Decatur, Illinois while he was still a gubernatorial candidate in the summer of 1998. Methanex also alleged that ADM influenced the governor by giving him contributions totaling about $200,000.

Davis had requested an ethanol waiver because of concerns that compliance would lead to a spike of at least $450 million annually to Californians' gas bills based upon a report by the California Energy Commission, which said that implementation of the mandate would add three cents a gallon to fuel prices. Methanex officials argued that Davis's oxygenate waiver was being used as a ploy by the governor to make it appear he wasn't siding with ethanol.

In June, President-Select George W. Bush issued an order requiring California to use ethanol as a gasoline additive. Prior to Davis's order and the Bush ruling, California had been using the petroleum-based additive MTBE to reduce air pollution from vehicles. The administration's ruling meant California, one of nation's largest consumers of gasoline, lost its exemption from forced ethanol use.

The Bush order was immediately hailed by corn farmers and farm state politicians as being a significant boost to corn producers. Iowa Corn Growers Association president David Boettger said that the mandate could mean the sale of nearly 200 million more bushels of corn to meet the demand. Iowa Gov. Tom Vilsack said Bush's decision on corn-based ethanol sales to California was "great news" for the state, the nation's largest corn producer, and "could add ten cents to 15 cents per bushel to the value of corn."

National Farmers Union President Leland Swenson praised the EPA decision noting that the family farmer and rancher organization applauded the action as a benefit for farmers, rural communities and all Americans who enjoy clean air, clean water, and reliable sources of energy. "The action by the administration to maintain clean air standards is good policy," said Swenson. "It is good for farmers and rural communities. It is good for consumers who need clean, safe and reliable fuel sources. We need policies that recognize that the solutions to many of today's energy and environmental challenges can be found on the farm.

"The demand for ethanol, biodiesel and other renewables is on the increase," he added. "Farmers are eager to produce for this market. Americans continue to recognize the importance and value of renewable, farm-produced sources of fuel and energy. We commend the administration for its leadership on this important policy matter."

Keith Dittrich, President of the American Corn Growers Association (ACGA) also commended Bush and the EPA for holding firm on the oxygenated fuel requirements for the state of California. "This decision brings long-term stability and provides a positive future for the ethanol industry," stated Dittrich.  "This will strengthen our industry by allowing our current ethanol plants to continue producing renewable, home grown,
clean burning motor fuel. This decision also provides new, and expanding facilities the financial stability to develop production and provide alternative markets and value added processing for farmers. America's farmers can meet the demand!"

Meanwhile, ethanol-industry officials believe the Bush decision will launch over $1 billion of construction projects in dozens of farm belt communities as the industry will need to expand capacity by roughly 30% to produce the 580 million gallons of ethanol that California will potentially need annually by 2003.

Ethanol-industry officials are also optimistic the California ruling means the administration probably won't grant similar exemptions to Northeastern states such as New York and Connecticut.

Obviously the company that stands to benefit most from the administration's decision is the nation's largest commodity processor. "This is a clear win for ADM," said David Nelson, an industry analyst at  Credit Suisse First Boston in New York.

"There's only a finite amount of crude oil and natural gas. With ethanol, we grow it. It's very difficult to argue against it," said Larry Cunningham, ADM senior vice president for corporate affairs. "The president has said he wants renewable fuels to be a part of his energy policy. His father was pro-ethanol when he was president. We think we're on the side of the angels," he said.

While ADM, its friends in government and most corn farmers were thinking in heavenly terms, other were looking at the ruling more in down-to-earth and below terms.

As nationally syndicated farm columnist Alan Guebert wrote several weeks prior to the Bush announcement:

"Before farmers get too giddy, an unadulterated view of reality is in order. First, according to USDA's Office of Energy, each 100 million bushels of corn made into ethanol boosts U.S. corn prices two to four cents per bushel. If oilman Bush favors farmers  . . . . California's ethanol needs could raise corn prices a modest five to ten cents per bushel.

"Second, if oilman Bush fails to deliver California --- a state he lost in the last election, wants to win in the next one and holds ten times more votes than farmers hold nationwide --- today's massive ethanol production expansion looks like a prelude to an industry shakeout.

"Third, global economics and geopolitics, not just U.S. ag economics or California politics, heavily influence ethanol's long-term profitability. The production and price of crude oil, the president of Venezuela, some billionaire Arab sheik, a European recession, new technology to make oxygenated fuel, China and South America's growing corn production, U.S. tax policy and a continuation of an unchanged Freedom to Farm after 2002 are all downward price pressures that will easily --- as easily as today's price shows --- suppress some or all of ethanol's upward price push on the U.S. corn market."

Others also voiced skepticism if not outright scorn at the Administration's decision.

Janet Hathaway, a lawyer for the Natural Resources Defense Council,  a specialist in fuels and vehicles, told the Wall Street Journal that the decision "means that the whole country has to use ethanol in every gallon of  reformulated gas, which means suddenly a lot of demand has to chase a limited supply, which always means prices go up."

Ethanol may also have other problems in California David Sykuta, executive director of the Illinois Petroleum Council in Springfield, Illinois told the Peoria Journal Star.

While acknowledging ethanol's ability to reduce carbon monoxide in automobile emissions, Sykuta raised the issue of ozone pollution. "There are questions about how you would use ethanol in the summertime when you have ozone problems," he said, referring to ethanol's tendency to evaporate in warm weather.

"The biggest problem is that ethanol can't go in a common carrier pipeline. Almost all of the fuel used in this country travels by pipeline. But because of ethanol's tendency to attract water and its corrosive qualities, ethanol would have to be moved around by truck and rail car," he said. "Maybe in California, they could make ethanol out of rice but that wouldn't make our corn farmers too happy."

"This was political pandering to the farm lobby and the other companies that benefit from increased ethanol," Keith Ashdown of the Washington, D.C.-based watchdog group Taxpayers for Common Sense told the Des Moines Register. He cited in particular ADM as the largest beneficiary of a federal tax break on ethanol that was extended in 1998.

In the early 1970's when the nation was gripped by an "energy crisis" it was ADM which seized upon the already farmer-proven idea of distilling large amounts of surplus grain into a new domestic fuel called gasohol --- gasoline mixed with one-tenth ethanol made from corn.  With generous financial help, to the tune of more than $4.6 billion in subsidies and tax breaks from Congress and the various state governments between 1979 and 1989, ADM soon became the nation's leading ethanol producer controlling over 55% of that market. A CATO Institute study estimated that during this period 43% of ADM's profits came from federally subsidized products like ethanol.

Despite the fact that it regularly makes nearly every hit list of "corporate welfare;" despite the fact that its biggest champion former Senate Majority Leader Robert Dole is no longer in the U.S. Senate; despite the fact that environmentalists no longer are enthusiastic about it as an alternative fuel; despite the fact the General Accounting Office (GAO), the Congress's investigative agency, has questioned its merits, pointing out that the wide use of ethanol led to a increase in feed costs by 22 cents to 40 cents per bushel raising the cost of poultry, pork and meat; and despite the fact that its biggest producer ADM had become a political liability, the ethanol subsidy, which has cost more than $7 billion to date is destined to survive well into the 21st century.

Occasioned in 1978 by the Mideast oil shocks, the ethanol subsidy was intended as a short-term incentive for alternative fuels. Later clean-air laws were expected to boost demand and make long-term subsidies unnecessary.

The subsidy gives gasoline blended with ethanol a 5.4 cents-a-gallon reduction in the federal gas tax of 18.3 cents -- equal to 54 cents per gallon of ethanol, since most gas blends contain one-tenth ethanol. Through 1995, that cost the federal highway trust fund, which receives proceeds from gas taxes, $7.1 billion. The tax break, of course, goes to blenders like ADM. The CATO Institute's report estimates that each dollar that ADM earns in profit from ethanol costs the taxpayers of the country $30.

At the same time Cornell agronomist David Pimental was showing that it actually took 72% more energy to produce a gallon of ethanol than a gallon would ultimately yield, due to the energy expended in growing, harvesting, fermenting and transporting the corn.

Watchdog group Common Cause has also found that ADM contributed more than $4.5 million in unregulated "soft money" to politicians between 1987 and 1997. Recipients included Democrats and Republicans. ADM gave $735,200 in total donations to candidates and parties during the 2000 election cycle, including $100,000 to help pay for Bush's inauguration.

Behind the headlines of the Administration's ruling favoring ethanol the real story of who will ultimately benefit from that ruling began to take shape and continues to unfold to this very day relatively unnoticed and ignored.

In the days immediately prior to the California ethanol ruling the government announced that it planned to sell 100,000 tons of surplus sugar for refining into ethanol. At the same time the USDA also revealed that it was holding nearly 747,000 tons of sugar that was forfeited by producers last year under a program that supports sugar prices.

Storage for the sugar costs taxpayers $16.5 million a year. "Efficient management of the program requires that we try to do something with those crops," said J.B. Penn, USDA's undersecretary for farm and foreign agricultural services. The planned sale is small enough to keep from reducing corn prices, Penn said.

The surplus sugar cost the government about 20 cents per pound. Ethanol producers are not expected to pay more than a third of that price.

A "memo" from Decatur, according to the Agribusiness Council's (ABC) Nick Hollis,  "indicates that more than 615 million bushels of corn will be displaced by the use of sugar feedstock to produce ethanol.

"On top of all the bogus economics that corn farmers (and the nation) have been force-fed over the years on ethanol being good for midwest farmers, this latest decision really shows how bankrupt and corrupt this system has become. Stockpiled sugar virtually given away to ADM and its vast array of controlled cooperatives and smaller ethanol producers (who sell back into ADM which has a virtual monopoly on the transport of ethanol), really helps ADM --- and possibly a few big sugar producers in Florida," Hollis adds.

Adding intrigue upon intrigue to the Administration's California ruling is also the renewed efforts by Mexico to solve a long-standing dispute with the U.S. over the importation of sweeteners.

Solving the sweetener dispute between the U.S. and Mexico remains "an extremely high priority" for both sides, according to U.S. Deputy Trade Representative Peter Allgeier. "It has enormous economic and political importance for both sides," Allgeier said in a speech on July 16 to Women in International Trade. For Mexico, it is important to ship more sugar to the United States, and for the U.S. to ship more high fructose corn syrup to Mexico.

One of the world’s leading producers of high fructose corn syrup is ADM.

At the same time Allgeier was voicing his concerns Mexican and Illinois officials were agreeing to discuss producing ethanol from Mexico's surplus sugar, reportedly to provide more business for struggling Mexican cane growers and helping Mexico City reduce smog.

A financial crisis in Mexico's sugar industry, in part caused by the surplus production, has sparked street protests by farmers who have not yet been paid for their harvests. In early July, 5,000 sugar workers stormed Mexico City, blocking government offices and demanding more than $400 million in back pay from private sugar mills.

Now nearly a month later, hundreds of sugar workers living in tents on sidewalks and traffic islands in Mexico's capital say mills have refused to pay them for their crops, arguing bankruptcy. Corn farmers in northern Sinaloa state blocked gas stations earlier this month, demanding higher tariffs on U.S. and Canadian produce.

In a Dow Jones telephone interview from Springfield, Illinois, Department of Commerce and Community Affairs director Pam McDonough said the state's assistance was just part of being a "good international neighbor," but she added that it could eventually open up opportunities to sell "Illinois corn" in Mexico.

Mexico's initial plans appeared to be to produce ethanol for domestic use,  she said. ADM, with headquarters in Decatur, Illinois has been supportive of the idea, providing research, she added.

Mexico and the U.S. have been involved in a four-year dispute over Mexico's right to export all of its surplus sugar production duty-free to the U.S.. The U.S. wants to limit Mexico's surplus sugar exports. The dispute broke out in June 1997, when Mexico slapped antidumping duties on U.S. high fructose corn syrup imports, which are used mostly in soft drinks and bakery products. The U.S. protested the antidumping duties and retaliated by excluding Mexico from any increase in the amount of sugar it can export to the U.S. duty-free.

Central to this whole particular continuing domestic farm, trade and environment policy manipulation is corn --- and more specifically the domestic price of corn and its availability.

Currently ample stockpiles, declining demand and indications of a potentially huge corn crop are depressing prices for the commodity and adding to the already depression-like economic conditions of the nation's midwest farm economy.

With the finish of their planting season, corn farmers see little hope that the return on their crop will be much better than it was in the 2000-2001 season, when farmers averaged about $1.85 a bushel for corn --- roughly 25-year lows.

In addition, the USDA recently dealt the corn market a sharp blow when it estimated that corn stockpiles, known as "ending stocks," would be nearly two billion bushels at the end of the 2000-2001 season.

Meanwhile, at the same time that corn prices have been plunging to new lows, the value of U.S. corn exports fell by eight percent to $4.71 billion last year alone as corn exports have fallen and stagnated in a range from $4-to-$5 billion for most of the 1990s, except for an extraordinary jump in 1995 and 1996 --- as some interests were driving the so-called "Freedom to Farm" Act through Congress. The promise of sharply higher export sales was the key selling point of the Act.

Charles W. McMillion, Ph.D., President & Chief Economist at MBG Information Services, a business information, analysis and forecasting firm points out that the principal "export opportunity" that has been promised to corn and other agricultural producers throughout the 1990s has been access to an immense, supposedly import starved, market in China.

Two years ago, for example, he writes, "the American Farm Bureau issued a report, adopted by the U.S. Trade Representative, anticipating annual U.S. corn exports to China of $650 million if 20 years of `Normal Trade Relations' with China were made `Permanent.'

"However, claiming to have 900 million farmers, China has produced a glut of agricultural products for a generation, is the world's second largest exporter of corn and normally imports no sweet corn and little seed corn. Oddly, the only year of any significant U.S. corn exports to China was 1995, a year in which China reports warehouses overflowing with corn and Chinese corn growers unable to sell their crops.

"U.S. corn export to China fell to virtually zero last year from just $15.6 million in 1999 and $44.2 million in 1998. China reports importing a total of only $0.35 million in corn last year (mostly seed corn from Germany) and none from the U.S.," McMillion adds.

"However, China's corn exports soared by 133% last year to $1.05 billion displacing U.S. exports in Korea and elsewhere. Last year, China's corn exports to Korea soared to $601 million from $135 million in 1999, an increase of $466 million. At the same time, U.S. exports to Korea plunged by $365 million, from $575 million in 1999 to just $210 million last year. Other large US export markets were also affected in Malaysia, Indonesia and the Philippines.

"Going forward," he concludes, "it will be important for corn and other agricultural producers to look more critically at promises of export growth in general and particularly at promises of export growth to China. On the contrary, it seems vital that U.S. producers understand that China's 900 million farmers are now their major competitors."

As if the situation for corn farmers wasn’t already bleak enough they might be even more jolted out of their euphoria concerning the Bush Administration's ethanol ruling in California by a letter which appeared in the July 25, 2001 New York Times from Winston H. Hickox, Secretary of California's Environmental Protection Agency. It read:

"California has not determined its response to Washington's mistaken decision not to allow us flexibility to produce the cleanest, cheapest gasoline we can (with or without any additives).

"If and when California makes the switch to ethanol, we have not yet determined the most economical source of that fuel additive. Just as refiners must sometimes use imported oil, it may sometimes be more practical for us to use ethanol that is not made from corn.

"Gov. Gray Davis has assigned me the task of analyzing our state's ethanol situation. After I report in mid-September, the decision will be made as to whether we import additional Midwestern ethanol."

Summing up succinctly this latest chapter in the continuing saga of an American "outlaw" corporation which has willingly engaged in corporate fraud and conspiracy and who has openly boasted that the "competitor is our friend and the customer is our enemy" and whose one-time CEO Dwayne Andreas has proclaimed  "when it comes to agriculture there is no such thing as a free market," Agribusiness Council's (ABC) Nick Hollis notes:

"ABC has been warning just about anyone who would listen for several years regarding ADM's `center pivot' (ethanol) strategy and the need for a low cost feedstock. The latest news from Mexico might just shock a few of those rather foolish looking corn state senators/representatives who have been carrying the water for ethanol (particularly Iowa, Nebraska, Indiana and Missouri).to bully the White House into denying California's request for an oxygenate waiver. How does this announced `last tango' in the sugarcane fields sit with corn farmers?

"Clearly, Andreas is playing his Mexican sugar card with plenty of lubrication in Mexico City, Washington and Springfield --- and he is taking trade distortion to a new level. First, ADM tries to flood the Mexican sugar/soft drink market with HFCS, bringing on a defensive, trade restrictive reaction by Mexico aimed at helping its sugar industry, and now the same Dwayne rides in on a white horse (behind the official toadies of course) and offers to help Mexico by converting sugarcane to ethanol," he adds.

"What this neat compartmentalizing fails to note is that ADM is desperately seeking new, lowcost feedstocks for ethanol to supply the expected California market. This cannot be good news for Mexican or American farmers, particularly those in sugar and/or corn.

"If we look at the roller coaster ride down for U.S. corn since 1978 (about the time ADM started up its ethanol big time), its been a near disaster. Corn exports in real dollars have plunged and prices have dropped off as well, reducing farmer income. Without massive federal handouts aimed at keeping production high, this subsidized distortion would have collapsed long ago," Hollis continues.

"No doubt when the inevitable comes, it will be painful, but playing these subsidies games is somewhat like playing Russian roulette with the international trading system. Perhaps it is just a coincidence but the Bush Administration is also now considering the provision of legal status to several million Mexicans who have entered the U.S. illegally. Maybe the plan is to shift them to those Illinois farms where ADM wants to create a new class of landless serfs.

"This is truly a breathtaking display of arrogance and raw power being displayed just behind the scenes," Hollis concludes, "and there is a massive outrage about to be perpetrated on honest working people everywhere --- brought on by a company which pled guilty to criminal price fixing only a few short years ago --- and whose once heir apparent still sits in federal prison. But if you listen to the `spins' it will sound oh so reassuring and after all it is the dog days of summer."

Taking a clue from the U.S. Department of Justice's unwillingness to prosecute Archer Daniels Midland (ADM) for being part of a conspiracy to fix the price of high-fructose corn syrup (HFCS), Chief Judge Michael Mihm of the U.S. District Court for the Central District of Illinois in Peoria has summarily dismissed a six-year-old civil lawsuit against ADM, A.E. Staley Manufacturing Co., Cargill Inc. and American Maize Inc. brought forth in a class-action lawsuit by soft drink makers Coca-Cola and Pepsi.

The lawsuit was launched after a federal investigation into ADM's involvement in a world-wide price-fixing scandal. ADM received immunity from all other charges when it pleaded guilty to fixing the prices of lysine and citric acid in 1996. The company was never convicted of fixing the price of corn syrup.

As James B. Lieber explains in his authoritative and well-documented book Rats in the Grain: The Dirty Tricks and Trails of Archer Daniel's Midland - The Supermarket to the World  (Four Walls Eight Windows: New York, 2000):

"As a practical matter, there is still too much official secrecy in [the ADM price fixing} case. Although the main events occurred five or more years ago and convictions have been obtained, the government declines to comment or disclose a good deal of public information. It drags its feet and obscures Freedom of Information Act (FOIA) request. Indeed, it sometimes treats the case as if it pertained to national defense, terrorism, or nuclear secrets . . . . .

"Nor will the government disclose why it shut down the federal grand jury investigating price fixing in the nearly $3 billion high fructose corn syrup (HFCS) market dominated by ADM with a 32% share. This commodity is worth more to ADM than lysine and citric acid put together. The potential fine for manipulation of the HFCS market by ADM, if convicted, could have exceeded a billion dollars."

Pointing out each dollar of profit ADM achieves from HFCS costs the taxpayers $10, the Pittsburgh, Pennsylvania attorney-author observes that "in keeping with its tendency to hedge and to be poised if the political pendulum swings, ADM owns eight percent of Tate & Lyle, a British sugar refiner. But Tate & Lyle owns A.E. Staley, the second-leading U.S. high fructose maker, which like ADM is based in Decatur [Illinois]. Cozily interlocked to the point of incestuousness and propped up by government, agribusiness understandably lacks a reputation for letting markets run free either in this country or abroad."

Lieber goes on to speculate that because HFSC was ADM's most valuable product, evidence showed that it undoubtedly merited the direct attention of both Dwayne O. Andreas, the then chairman of the Board and CEO and his son Mick Andreas, the vice president of the company who is currently serving time in federal prison as a result of the price-fixing scandal.

"The information emerged in a deposition," Lieber writes, "in the huge civil class-action case alleging price fixing in the HFSC market. The witness was James House, head of the commodity procurement at Kraft Foods. Because high fructose was a major commodity to Kraft, House's job involved locating sufficient supplies at favorable prices. Kraft came to believe that the major HFSC makers (ADM, Cargill, CPC and A.E. Staley) fixed prices in 1994."

House told stories of attempted bribery to keep a new competitor out of the market, driving a company from the market with collusive low prices, and allocating customers among competitors, all in violation of anti-trust laws.

But, as Lieber reports, "on two occasions Justice Department officials met with Kraft executives. However, James House was not called to testify before the Atlanta-based high fructose grand jury, which later disbanded without issuing indictments. For Justice to pass up a prosecution is not necessarily evil or unusual. Rather, the culture of the department is such that it mainly chooses to prosecute only the strongest and most winnable cases. Defense attorneys who square off against the department know its penchant for slam dunks."

In dismissing the six-year old civil lawsuit Judge Mihn did not disclose any details of the plaintiff's case because he has much of it under a protective order.

Jeff Kanter, senior food analyst at Prudential Securities in New York, said the ruling would save ADM money and help its image, which he noted has taken a beating over the past six years. "ADM's been trying to shut the door on its recent past, and this allows them to put a lock on the door and look forward," Kanter said.


In what should come as no surprise to those tracking events related to the  continuing corporate scandal that is Archer Daniels Midland, that Greg Frazier, former chief-of-staff to USDA Secretary Dan Glickman  has joined the well-connected Washington, D.C. law firm of Akin, Gump, Strauss Hauer & Feld.

Frazier, a non-lawyer who will join his old boss at the law firm, will "advise" on international trade matters.

Glickman, whose joining the major Washington lobbying and law firm earlier this year after the Clinton Administration left office,  to "advise" the firm's clients on food and food safety, health, biotechnology and international trade issues, has its curious aspects.

Glickman signed on as a partner in the public law and policy practice group and while he says he'll "probably play a role . . . one way or another" in new farm legislation, reported the Washington Post's Judy Sarasohn, he will not actually be buttonholing his former colleagues, says partner Joel Jankowsky.

"We . . . didn't bring him on to occupy the halls of Congress. We have other people to do that," said Jankowsky, who heads the public law and policy practice group. "Virtually every one of our clients is affected by the intersection of government and business," Jankowsky said, and Glickman's "ability as a problem solver" will benefit the firm's clients.

"For 25 years, I've been involved in the public policy sector and this firm has the best public policy practice I've seen," Glickman told Sarasohn in an interview. He said he also admired how senior partner Robert Strauss, who held posts in both Democratic and Republican administrations as well as heading the Democratic Party at one point, has been able to "transcend party politics."

Now with the addition of Frazier, his former aide at USDA, Glickman's "admiration" of Strauss, a long-time personal friend of Dwayne O. Andreas former CEO and Board Chairman of Archer Daniels Midland (ADM) and current ADM board member, makes the two former USDA officials new role with Akin, Gump, Strauss Hauer & Feld one of curiosity and might even suggest the answers to certain unanswered questions surrounding the ADM price fixing scandal and the negotiations surrounding the debarement issue.

Serious issues remain about the role of Glickman & Co. and the USDA's failing to debar ADM after guilty firm paid a fine totaling $100 million based on the Plea Agreement in which it pled guilty to engaging in a world-wide corporate conspiracy to fix the price of lysine, a cattle and poultry feed additive. In effect, the plea agreement, forced the American taxpayers to pick up over $83.5 million of the $100 million fine.

In letters to Secretary of Agriculture Ann Veneman, Attorney General John Ashcroft and President-Select George W. Bush, the issue of a compliance agreement in lieu of debarment was raised by a Redondo, California concerned citizen Oscar B. Pichardo.

"I have just finished reading Rats in the Grain by James B. Lieber," Pichardo wrote in his letters, "detailing the criminal activities of ADM over the last four decades; particularly over the past ten years. The author points out a very disturbing fact: although convicted of criminal behavior, the USDA has not debarred Archer Daniels Midland."

On October 15, 1996, when Judge Ruben Castillo asked if there were any other agreements or promises that had been made to the company, the ADM lawyers responded none had been made. Pichardo points out that such a claim represented "a serious misrepresentation in obtaining the Plea Agreement, as defendants are required by law to disclose all agreements in open court before a settlement can be finalized."

Lieber, in his book, relates that the Justice Department still maintained that its negotiators on the plea were Scott Lasser, James Griffin, and Gary Spratling. Lassar convincingly denied that they had any discussion on debarment with their negotiating partners at Williams & Connolly, the politically powerful Washington, D.C. law firm. Moreover, Lassar conceded that if such an understanding were reached outside of the official plea agreement, it would constitute "dirty pool."

"However," Lieber reveals, "evidence emerged that there had been a second negotiating team from Akin Gump, and that the debarment matter received the direct attention of Secretary of Agriculture Dan Glickman, a former Kansas congressman and major beneficiary of campaign support from ADM.

"The failure to lift ADM's government contacts remains a touchy matter in both Justice and Agriculture, which steadfastly have resisted Freedom of Information Act inquiries on the plea negotiations and debarment issues. However, if a judge decides that the true nature of the plea agreement was not revealed, the guilty plea could be negated. That could cause ADM to go to trial, its employees to lose immunity, and the antitrust and fraud investigations to be re-opened."

In a response to Pichardo, a USDA Acting Deputy Administrator for Commodity Operations Alex King noted:

"On October 15, 1996, ADM entered into a plea agreement with the United States represented by the DOJ whereby ADM agreed to plead guilty to two counts of violating the Sherman Antitrust Act. ADM paid a fine totaling $100 million based on the Plea Agreement. In the Plea Agreement, DOJ acknowledged that ADM provided substantial assistance in the investigation conducted by the United States.

"Additionally, a Compliance Agreement in Lieu of Debarment was made between ADM and USDA as part of our efforts to ensure that future business dealings would be conducted with the high degree of integrity that the Government expects of all its business partners. Based on USDA's reviews and verification of ADM's adherence to the compliance agreement, it was decided at that time that further action was not necessary to protect the Government's interests."

King's letter choose to ignore comments made at an April 18, 1999  town meeting on "Concentration And Monopoly In Agriculture" held in St. Paul, Minnesota.  Hosting the event were Senators Paul Wellstone (Dem-Minnesota), Tom Harkin (Dem.-Iowa, and Tom Daschle (Dem.-South Dakota). Special guests included Joel Klein, Assistant U.S. Attorney General, Anti-Trust Division, and Michael Dunn, Assistant Secretary, USDA Marketing and Regulatory Programs, Packers & Stockyards Programs.  In attendance were over 800 farmers and farm groups from numerous surrounding states.

Klein was asked at the meeting if he was the person who supervised and signed off on the ADM plea agreement, and he confirmed that he was.  He was also asked how the Justice Department calculated the enormity of such a fine, and he gave an explanation. 

Dunn was then asked why the USDA would let ADM keep its contracts worth nearly $85 million and on the other hand fine ADM only $100 million dollars. Dunn replied that ADM wanted to keep this business, and this was part of the plea agreement. Dunn not only made it known that Klein was involved in the decision, but went into detail on how this deal was done with the Justice Department concerning ADM being allowed to keep USDA business. 

In a  May 21 letter to Pichardo, another Acting Deputy Administrator of USDA's Commodity Operations Steve Gill added, "Your letter implies that suspension and debarment are appropriate forms of penalties. This is not correct. As stated in the regulations governing suspension and debarment of government contractors `[t]he serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest and not for purposes of punishment.' (48 C.F.R. *9.402(b). The Department of Agriculture views the Compliance Agreement as adequately protecting the United States and in our overall best interests."

In replying to King's letter Pichardo expressed his dissatisfaction with the USDA explanation.

"It is a matter of public record ADM did not provide `substantial assistance'
in the price fixing investigation," Pichardo responded to King. "Nowhere in the Plea Agreement is this `substantial assistance' mentioned. Neither is the Compliance Agreement in Lieu of Debarment a part of the Plea Agreement nor was this agreement disclosed in open court as required by law.

"Furthermore, your statement USDA's `reviews and verification of ADM's adherence to the compliance agreement' is flawed. The Plea Agreement between DOJ and ADM covered the period ending June 1995. Since then, ADM has been named in various anti-trust suits in Illinois, California, Massachusetts, Alabama and Georgia. It has also settled law suits against it for irregularities in the marketing of HFCS and sodium gluconate not covered in the Plea Agreement.

"Additionally," he adds, "the Commission of European Communities and the Mexican government commenced investigating ADM activities in September 1997, November 1998 and February 1999.  These investigations are not consistent with future business dealings conducted `with the high degree of integrity that the Government expects of all its business partners.'

"Likewise the statement `on December 3, 1996 the Department of Justice indicted three top level ADM executives, subsequently suspended from Government contracting, in accordance with the rules and regulations stipulated in the Federal Acquisition Regulations' is misleading. One of the indicted was the whistle blower who alerted and cooperated with the FBI regarding ADM's illegal activities [Mark Whitacre]. He was subsequently dismissed by ADM in August of 1995.

"On the other hand, the other two executives were provided well connected law firms [Williams & Connolly] for their defense, and their legal expenses were assumed by ADM. Their supposed suspension from government contracting per the FAR would not take place until September of 1998 when convicted. Since one retired and the other took a leave of absence from ADM in October of 1996, the suspensions amount to window dressing --- making for great publicity with no de facto penalty. In the meantime ADM has continued conducting business with the USDA, and American taxpayers have been subsidizing both fines and legal expenses incurred by ADM as a by-product of their illegal activities.

"Frankly," Pichardo concludes, "Mr. King I fail to comprehend how this construes `protecting the Government's interests' or demonstrates `the interests and concerns of the American taxpayer take first priority in USDA's programs.' I find it unconscionable ADM continues to conduct business with the USDA, raking profits from the American taxpayer it has defrauded.

"I am not sure the amount of effort expended in composing your reply, but it fails to adequately address the issues raised in my original letter. It also raises another issue demanding investigation," he adds.

"Why was the Compliance Agreement in Lieu of Debarment not disclosed to Judge Ruben Castillo as required by law? The failure to comply with this legal requirement casts a serious shadow on the legality of the Plea Agreement between ADM, DOJ, and USDA granted by Judge Castillo on October 15 1996."


Recently, in a conversation with a reader of THE AGRIBUSINESS EXAMINER, the
reader in critiquing it, mentioned that the one thing that was particularly annoying to
them about the newsletter was the editor's weekly "begging" for contributions. (I will
leave it up to the readers imagination as to whether the critic had ever in fact made such
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While THE AGRIBUSINESS EXAMINER is a subscription free e-mail newsletter it
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Readers of THE AGRIBUSINESS EXAMINER are reminded that past issues of the
newsletter can be found at the Corporate Agribusiness Research Project’s web site on
the Internet. The CARP web site features: THE AGBIZ  TILLER, THE
AGRIBUSINESS EXAMINER and "Between the Furrows."

THE AGBIZ TILLER, the progeny of the one-time printed newsletter, now becomes an
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