The
AGRIBUSINESS
EXAMINER                                                Issue # 80   June 28, 2000

Monitoring Corporate Agribusiness From a Public Interest Perspective
 

A.V. Krebs
Editor\Publisher
 

                                                    EDITORS NOTE
Due to travel plans and personal affairs Issue #81 of THE AGRIBUSINESS EXAMINER will appear the week of July 17-21, 2000, Happy Fourth of July  all!!!!!!! . . . and be careful out there with the hamburgers and bar b-q chicken . . you never know!
 

7TH U.S CIRCUIT COURT OF APPEALS:
CASTIGATES ADM'S EXECUTIVES,
"LIED, CHEATED, EXTORTED, OBSTRUCTED JUSTICE"
URGES EXTENDED JAIL TERMS

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 U.S. Circuit Court of Appeals affirmed Monday 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 U.S. 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 U.S. 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."
 

IBP AGAIN ISSUES TWO SEPARATE RECALLS
OF E.COLI BEEF; USDA'S INSPECTOR GENERAL CALLS
U.S. MEAT/POULTRY INSPECTION "INADEQUATE"

Two major recalls last week 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, on Friday 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. On Saturday 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 U.S.ís 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 Friday 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 U.S., 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 Saturday's 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 U.S. 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 U.S. 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, coincidentally, 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 U.S.'s third largest beef  export account.

And, after Swiss health inspectors last July discovered imported U.S. 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.
 

PHILIP MORRIS BUYS NABSICO FOR $14.91 BILLION
ATTAINS "PORTFOLIO OF BRANDS AND POWER"
NOW WORLD'S 2ND LARGEST FOOD MANUFACTURER

"By the year 2000, there will be two consumer goods companies in the United States: RJR Nabisco will be selling all the consumer goods west of the Mississippi, and Philip Morris will be selling all the consumer goods east of the Mississippi."

Michael Pertschuk, former Federal Trade Commission chairman speculating on tobacco companies accumulating cash and diversifying, "Kraft Bid  Is Just Another Bite in Food-Firm Feeding Frenzy," by Warren Brown, The Washington Post, October 19, 1988

"With the Nabisco purchase, Philip Morris's Kraft unit will be able to retain its position as second-largest food company in the world, behind Nestle SA; it had been in danger of losing that spot to Unilever, which recently agreed to buy Bestfoods. The combined Kraft-Nabisco operation boasts pro forma 1999 sales of $34.9 billion and operating profit of $5.5 billion. Kraft will have an awesome swath of brands --- from Cracker Barrel cheese and Maxwell House coffee to Ritz crackers and A-1 sauce -- commanding enviable clout with retailers. The deal will likely add pressure on other food companies, already facing weak margins and sluggish sales, to get bigger to compete with the likes of Nestle, Kraft and Unilever, the Big Three of the global food business."

"Philip Morris to Purchase Nabisco For $14.91 Billion, Plus Assumed Debt," by Nikhil Deogun, Gordon Fairclough and Shelley Branch, Wall Street Journal, June 26, 2000.

"At a news conference Monday, Philip Morris Chief Executive Geoffrey C. Bible bragged about the ability to promote Nabisco's Ritz crackers with Kraft's vast repertoire of cheeses. An advertising coup? Perhaps. But Mr. Bible and the folks at Kraft more likely are thinking about how to use their new snacks as a battering ram at the doors of retailers. `Because of consolidation in the retail industry, [companies] need to have a portfolio of brands with power,' says Tom Palombo, president of Merchandising Corp. of America, which handles displays for packaged-goods companies. `Years ago, if you didn't buy my brand, I'd sell to someone else.' With fewer retailers in the game, companies such as Nabisco have been hard-pressed to push around the likes of a Wal-Mart Stores Inc. or Kroger Co.  Until now."

"Mammoth Deals Are Expected to Spur More Consolidation in the Food Industry," by Shelly Branch, Wall Street Journal, June 27, 2000

"[Carl] Icahn's latest flirtation with Nabisco and Mr. [Stephen] Goldstone produced the final chapter in a 12-year-old corporate saga: Sunday's sale of the Nabisco food unit to Philip Morris Cos., owner of Kraft Foods and longtime rival to RJR Nabisco, for $55 a share, or $14.9 billion. That is double the stock's trading price three months ago. At the same time, the parent company, becoming a corporate shell filled only with cash, will be acquired by its former unit, R.J. Reynolds Tobacco Holdings Inc., for $30 a share, or $9.8 billion.  Mr. Icahn's 31 million shares of the parent company, which he again bought in November for about $341 million after the stock plunged, are now worth $930 million a profit of $589 million, or a 173% return in the span of nine months.  And Mr. Goldstone? He'll walk away with a reputation as a chief executive who was dealt a tough hand but eventually rewarded shareholders with a full house. He will also profit from his large holdings in Nabisco and will be able to take credit for finally undoing the damage caused by the biggest leveraged buyout in history."

"Icahn, Goldstone Profit From Friendly Rivalry," by Nikhil Deogun, Wall Street Journal, June 27, 2000
 

CONAGRA CORP. --- "A COMPANY OF HUNTERS"
BUYS INTERNATIONAL HOME FOODS
FOR $2.9 BILLION + $1.3 BILLION DEBT ASSUMPTION

"We're a company of hunters," and with those words ConAgra Chief Executive Bruce Rohde announced last week that his corporation, the nation's second-largest food company after Philip Morris, was buying International Home Foods for  a reportedly $2.9 billion. ConAgra will also assume $1.3 billion of debt.

Based in Greenwich, Connecticut., International Home Foods makes Chef Boyardee pastas, Bumble Bee tuna and Libby's Vienna sausages and had revenues in 1999 of $2.14 billion. ConAgra boasts about $25 billion in sales and close to 100 consumer brands. Combined, the two companies will have $28 billion in sales.

The purchase bolsters ConAgra's roster of products --- which includes its lucrative Healthy Choice Meals and Banquet frozen dinners --- with canned foods such as Dennison's chili and Libby's array of packaged foods and meats. "We've got ketchup and they've got mustard," referring to Hunt's ketchup and Gulden's mustard, ConAgra's Rohde boasted in an interview with the Chicago Tribune's Patrick Cole and  Ameet Sachdev.

"There's not an island in a grocery store where you can't find [our products]. This gives us a real role in setting America's dinner table," he added.

In 1999, IHF's sales increased 26% from the previous year to $2.14 billion, while net profit was up 24% over the prior year to $114.4 million.

Rohde said he didn't anticipate any cutbacks in personnel or consolidation of offices immediately after the acquisition. Yet IHF CEO Dean Metropoulos said he wouldn't rule out the possibility of future job cuts.

In recent years companies like ConAgra and IHF have been fighting fierce competition  from their rival manufacturers, including grocery-store-chain private-label brands, in the $737 billion food processing industry. In that climate, many food companies have sought growth, and its attendant leverage, through consolidation. Rohde told the Tribune that ConAgra has been involved in 300 acquisition deals over the past 25 years. The $3.2 billion purchase of Beatrice Co. 10 years ago is its largest acquisition.

Brian Eisenberg, a portfolio manager at Collins & Co., a San Francisco-based investment management firm, told Cole and Sachdev that about 47% of ConAgra's sales come from refrigerated meats that have low profit margins of less than 10%. "The combination of grocery stores merging with others and their offering private brands of food is where the pressure is coming from. That's what started ConAgra to look for acquisitions and mergers."
 

WATER KEEP ALLIANCE, ENVIRONMENTALISTS
SUE NORTH CAROLINA CORPORATE HOG FACTORIES
CHARGING POLLUTION OF STATE'S WATERS

Declaring that "pollution is theft and Smithfield has made itself wealthy by stealing the heritage, the health and the future of North Carolina," Robert F. Kennedy, Jr., president of the Water Keeper Alliance announced last week the filing of a thirty-six count  lawsuit  by environmentalists against North Carolina's corporate hog factories for the pollution  of the state's waters.

Plaintiffs in the suit include the Water Keeper Alliance, the Neuse  Riverkeeper, New Riverkeeper, Cape Fear Riverkeeper, Neuse River Foundation  and New River Foundation.  The named defendants, who own or operate the majority of hog factories in North Carolina include: Smithfield Foods, Inc., Carroll's Foods, Inc., Brown's of Carolina, Inc., Murphy Farms, Inc. and Wendell H. Murphy, Sr., Wendell H. Murphy, Jr. and Joseph W. Luter, III in  their individual capacity.
 
According to papers filed in Superior Court, Wake County, North Carolina's hogs now outnumber its citizens and produce more fecal waste than all the people in California and New York combined.  Some industrial pork factories produce more sewage than America's largest cities.

The suit notes that while human waste must be treated, hog waste is simply dumped into the environment. Likewise, stadium  sized warehouses shoehorn 100,000 sows into cages where they spend their lives straddling metal grate floors.  Aluminum culverts below collect and  channel the hog excrement from these grates into ten acre open air lagoons.

Thus, the environmentalists charge irresponsible spraying practices, overproduction of  hogs and faulty lagoon management have created an environmental catastrophe in eastern North Carolina's river and coastal communities. Odors from the putrefying wastes choke local communities while tens of  millions of gallons of hog feces from these lagoons oozes into North Carolina's rivers.  Plaintiffs are seeking an end to the lagoon/sprayfield  system and a clean up of the affected rivers.
 
"We've seen hog waste overflowing from lagoons and spewing directly into our
rivers," said Rick Dove, the Neuse Riverkeeper."We have also seen hog farms
spraying the contents of these lagoons onto flooded fields which feed into our rivers.  As stewards of our rivers, it is time to take action."
 
Headquartered in White Plains, New York, the Water Keeper Alliance is the umbrella organization for the fifty River, Sound and Bay Keepers located  throughout North and Central America.  Founded by Robert F. Kennedy, Jr.,  the Water Keeper Alliance protects and restores waterways using a variety of  methods, including litigation.  The Neuse Riverkeeper, New Riverkeeper and  Cape Fear Riverkeeper are members of the Water Keeper Alliance.  The Neuse  River and New River Foundations are the sponsoring organizations of the Neuse and New Riverkeepers respectively.
 
The riverkeepers said the companies knowingly polluted North Carolina's coastal plain as its hog industry grew fourfold in the 1990s to more than nine million hogs today.

Richard Poulson, a Smithfield vice president and senior adviser to Luter, claims the lawsuit is based on "voodoo science" and is intended to shut down the industry.

Rivers flowing through the hog belt are no more polluted than those winding through other parts of the state, he said. And the 29 documented releases from hog farms in 1999 paled in comparison to the 2,294 incidents at sewage systems, he added. An end to the lagoon system would "have a devastating effect on the state economy, especially east of I- 95," Poulson told the Wilmington Morning Star's Brian Feagans.

He pointed out that the pork industry contributed $62 million in state and local taxes in 1998 and that Smithfield alone pays $158 million to farmers in eastern North Carolina. Doug Abrams, a Raleigh-based attorney representing the riverkeepers, said the industry's economic contribution doesn't give it a right to pollute waterways with nutrients that can spawn algal blooms.

"The hog and cesspool system is a public nuisance," he said. "We have asked the courts to declare it inconsistent with the laws of North Carolina."

The plaintiffs estimate that more than 3.7 million wetland acres alone would be needed to treat the phosphorus produced by the state's hogs in the 1990s. That would cost roughly $150 billion, they say in the suit. "That's just an extortion tactic," Smithfield's Poulson said. The plaintiff's attorneys, he charged, are trying to "make millions off the
backs of hog farmers" by following in the footsteps of those who sued the tobacco industry. "They're just going to go from industry to industry and see if they can hold anyone up," he said."I assume the poultry industry will be next."
 

PERDUE CANCELS POULTRY GROWERS' CONTRACTS
DEMAND BINDING ARBITRATION CLAUSE
AS FINAL DISPUTE RESOLUTION METHOD

Perdue Farms Inc. is 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 1st 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/lb. 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 vs. 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.
 

SEARCH ENGINE FEATURE TO ACCESS
CORPORATE AGRIBUSINESS RESEARCH PROJECT
WORLD WIDE WEB SITE INTRODUCED

Another new feature has been added to the Corporate Agribusiness Research Project (CARP) web site. A streamlined search engine which will allow viewers to find needed information by simply using a key word. While the search engine will soon become a fixture within the current site, it can presently be accessed at:

http://www.ea1.com/CARP/search.html

The CARP web site, which is now posted on the World Wide Web, 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 on-line news feature of the Project. Its initial essay concerns one Hillary Rodham Clinton, the candidate for a U.S. Senate seat in New York State.

In "HILLARY RODHAM CLINTON'S $99,537 MIRACLE: IT'S THE PITS!!!" now available through THE AGBIZ TILLER you'll learn some of the messy details behind her cattle futures "miracle." You will also find in this section the archives for past editions of the THE AGBIZ TILLER.

By popular reader demand THE AGRIBUSINESS EXAMINER  section includes not only an issue-by-issue and verbose index of this weekly e-mail newsletter, but an archive of past issues #1 through #51..

In "Between the Furrows" there is a wide range of pages designed to inform and educate readers on the inner workings of corporate agribusiness. In addition to CARP's "Mission Statement," "Overview" and the Project director's "Publication Background," the viewer will find a helpful "Fact Sheet" on agriculture and corporate agribusiness; a "Fact Miners" page which is an effort to assist the reader in the necessary art of researching corporations; a "Links" page which allow the reader to survey various
useful  public interest, government and corporate web sites; a "Feedback" page for reader input, and a page where readers can order directly the editor's The Corporate Reapers: The Book of Agribusiness.

The CARP web site was design and produced by ElectricArrow of Seattle, Washington.

http://www.electricarrow.com

Simply by clicking on either of the addresses below all the aforementioned features and information are yours to enjoy, study, absorb and sow.

http://www.ea1.com/CARP/
http://www.ea1.com/tiller/