Against the Grain

RATS IN THE GRAIN:The Dirty Tricks and Trials of Archer Daniels Midland, the Supermarket to the World.

Anyone who had the misfortune to watch the presidential debates may have noticed that the moderator, Jim Lehrer, one of the most overrated journalists of our era, went out of his way to avoid asking the candidates questions that might have led to a discussion of the poisonous effect of special-interest money in politics.

As TomPaine.commonsense, a journal of opinion, noted recently in a New York Times advertisement, “Jim Lehrer says he hasn’t voted in decades. Maybe that’s why he doesn’t seem to care who funds campaigns. His PBS show, “The NewsHour,” rarely explores the issue…”

Never mind his failure to vote. A much better guess as to why he avoids talking about money in politics is that the primary sponsor of “The NewsHour” is the agriculture conglomerate Archer Daniels Midland, which has poured millions of dollars into politics. ADM advertises itself as “Supermarket to the World.” But as we are told by James B. Lieber, a premier magazine writer and author of this panoramic review of corporate corruption, some critics believe it should be more accurately described as “Superbriber to the Political World.” Lieber does a masterful job of showing why that appellation is justified. Indeed, an observer might fairly conclude that ADM’s political gifts, or bribes, are why the federal government has made it the nation’s foremost recipient of corporate welfare. Money is also why, as you will learn from Rats In the Grain, the U.S. Department of Justice and various Congressional committees have repeatedly given ADM extraordinary immunity from the kind of punishment it deserved for its criminal conduct.

Here is a global corporation that committed one of the rawest and most damaging price-fixing crimes of the twentieth century. In collaboration with its Japanese competitors, ADM fixed prices for three different commodities: lysine, an amino acid used to promote growth in pigs, poultry, and cattle; citric acid, the all-purpose flavoring and preservative used in foods and detergents; and high-fructose corn syrup, the major sweetener of soft drinks. By rigging the market, ADM and its co-criminals were enriched by millions of dollars, and consumers were impoverished by an even greater amount. The Justice Department could have, and should have, charged most of the top officials at ADM with mail fraud, as well as with violating the anti-trust laws by price-fixing. In fact, the government’s investigation pinpointed 49 ADM executives for participating in the price-fixing conspiracy. But the Justice Department ignored the fraud offenses entirely and indicted only two officials for price-fixing. Even there, the Justice Department went easy on them–paying no attention to the price-fixing that had been done with by far their largest commodity, high fructose corn syrup.

True, ADM was ultimately fined $100 million for its anti-trust rip-off of consumers. This may have been the largest anti-trust cash penalty ever imposed, but it was not–as the Justice Department tried to make us think– a crushing penalty. In fact, this was justice lite. First of all, as Lieber explains, ADM made a $300 million profit from fixing the prices of lysine and citric acid alone. Attorney General Janet Reno admitted, “Because of these illegal actions, feed companies, poultry and swine producers, and ultimately America’s farmers, paid millions more to buy the lysine additive. Also, manufacturers of soft drinks, processed foods, detergents and other materials, paid millions more to buy the citric-acid additive, which ultimately caused consumers to pay more for those products.”

For doing that much damage, federal sentencing guidelines permitted a fine of up to $224 million. Why did the government not seek a larger amount? And why did it give immunity to ADM for price-fixing in the far larger, nearly $3 billion, high-fructose corn syrup market that ADM dominated with nearly a one-third share? And in their allegedly hot pursuit of fraud and price-fixing by the corporation’s hierarchy, why did Justice Department attorneys and FBI gumshoes agree not to even question ADM’s two highest officials, Dwayne Andreas, chairman and CEO, and James Randall, president?

But perhaps the most important question of all is this: Why did the Justice Department let virtually all of ADM’s price-fixing executives off with only the proverbial slap on the wrist (the two conspirators who were put on trial, one being the chairman’s son, received sentences running only into months), while punishing with extreme harshness–a sentence of nine years–the one executive, Mark Whitacre, who was the whistleblower who enabled the government to make its case? Whitacre, under FBI supervision, wore a wire for two and a half years to record what was said at meetings in which the conspirators rigged the world markets. Without Whitacre, there would simply have been no case, and ADM would probably still be stealing millions of bucks from consumers.

Never before has a major informer been prosecuted by the government.

Interestingly, the bulk of Whitacre’s sentence came from conviction for fraud. He was accused of taking $9 million from ADM through under-the-table bookkeeping. He admitted doing it, but claimed it had the approval of his superiors, who were using the same technique to fill their own pockets. The evidence that strongly suggests he may have been telling the truth–evidence that the FBI made no effort to follow up–is a bit too complicated to go into here, but it is among the most fascinating reading in the book. If it affects you as it affected me, you will feel that Whitacre was railroaded by government officials who were under the long-term influence of ADM money, and were its agents for retaliating against the man who dealt it the worst blow in its history.

Everything about ADM is big, big, big, measured either by its annual sales–$19 billion–or by its material holdings, which include 355 processing plants, 500 grain elevators, 2,250 barges, 33,000 railroad cars, and more than 100 ocean-going ships. ADM’s home base in Decatur, Illinois, is the largest agricultural plant complex in the world. When it comes to processing corn, America’s biggest cash crop, ADM is the world’s leader, as it also is in producing ethanol or grain alcohol. And it is an international contender in handling other grains.

Over the past three decades it achieved unmatched success in its field through brilliant planning, close family control of operations, and (what can’t be repeated too often) political influence. Behind it all is the family’s patriarch, Dwayne Andreas, whom our author describes as “a political as well as sales genius enormously skilled at listening, speaking, stroking, partying, and paying in the corridors of power. Probably no one since the trust chieftains of the late nineteenth and early twentieth centuries has drawn more on the connection between business and politics or done as much to cultivate government officials.”

The operative phrase is “paying in the corridors of power.” ADM and Andreas personally have shoveled out the cash with nonpartisan generosity. It’s called “slopping both hogs.” Andreas loves liberals and conservatives alike, as long as they do his bidding. This book is about a corporate crime that could have resulted in crippling fines for ADM and long prison sentences for a host of men right at the top of the corporate hierarchy–but didn’t. So let us pursue further some of the money trail that perhaps explains why no such punishments were handed out.

Lieber tells us that, “from 1980 through 1995, ADM and Andreas family interests gave almost four million dollars to Democrats and Republicans with the balance tipping slightly towards the latter.

“During the 1996 presidential election, ADM gave $295,000 in soft money to Democratic party committees and $405,000 to Republican party committees. However, this didn’t tell the whole story. In 1994, a $100,000 ADM check supported a Clinton presidential dinner. In 1992, ADM wrote a check for $400,000 for a Bush dinner. Dwayne Andreas and his wife gave $10,000 to Clinton’s transition team after the 1992 election and $70,000 to Newt Gingrich’s political action committee, which mobilized for the 1994 midterm election,” in which the Republicans regained control of the House.

“Andreas built a statue of Ronald Reagan in Decatur, Illinois, ADM’s corporate home; he organized Democratic House Speaker Tip O’Neill’s retirement dinner, donated $1 million to the Nixon library, bought Jimmy Carter’s floundering peanut farm for $1.5 million.”

Slopping both hogs has been an ADM ritual for a long time. In 1972, Andreas and his circle poured about $400,000 – a huge contribution for that era – into the presidential campaigns of Hubert Humphrey and Richard Nixon. No one was ever closer to Andreas that the liberal Democrat icon, Humphrey. Both as senator and as vice president, Humphrey helped push through legislation that poured millions of dollars into ADM’s treasury through such programs as Food for Peace (which obliged the federal government to pay for food exports when foreign buyers defaulted). As with a lot of these programs, Food for Peace sounded benevolent. In actuality, it dumped so much wheat in India, for example, that thousands of that country’s farmers went bankrupt. Andreas got a host of favors from the Nixon Administration, least of which was a bank charter, granted with suspicious speed by Nixon’s comptroller of the currency.

Over the years, Dwayne Andreas’ generosity has been suspect. He slipped a thousand $100 bills into the Nixon White House in 1972, the year in which the term “money laundering” entered the nation’s vocabulary. In that same season a $25,000 check from Andreas somehow sneaked into the bank account of a Watergate burglar. But the old man has never tripped badly enough to earn a criminal record – except in 1993, when he and his wife paid an $8,000 fine for exceeding federal limits on political contributions.

Considering that ADM operates in one of the world’s most piratical industries, it has, like Andreas himself, led a charmed life. Until this recent conviction for price-fixing, it had suffered only a couple of legal wounds: a 1978 conviction for price-fixing grain sold to the Food for Peace program and a no-contest plea in 1976 to the charge of short-weighting and misgrading corn for export.

Politicians repay Andreas and ADM in many ways. Keeping tariffs on foreign sugar, for example, doubles the price of domestic sugar (which costs consumers about $3 billion a year). This makes our sugar farmers very happy, of course. But it also makes Andreas happy, because with the tariffs in place, ADM’s high-fructose corn syrup costs about 30 percent less than regular sugar. So corn sweetener has virtually replaced sugar in the soft drink industry. (This brings us to the double meaning of the book’s title. “Dwayne Andreas tells a colorful story about causing Pepsi to drop sugar by describing to its chairman how rats thrive in the hold of sugar freighters and urinate in the product, turning it yellow.”)

During the cold war years, when Congress threw up barriers to prevent trading with Communist countries, ADM was granted special permission to sell vast quantities of wheat (subsidized by United States taxpayers) to the Soviet Union. To Andreas, profits trumped ideology any day. “The Russians are not just another grain buyer,” he said. “They’ve bought billions of dollars worth over the years and have never defaulted. You get your impressions of people like them from what you experienced, not from what you dream.”

Ethanol, because of federal collusion with ADM, is another rip-off of taxpayers. The rip-off began under President Carter during the gasoline shortages of the 1970’s. Andreas persuaded Carter to support gasohol (a nine-to-one blend of gasoline and alcohol) with a tax-exemption subsidy that cheats the Treasury of about $770 million a year. ADM has a near-monopoly on the United States ethanol market, supported by tariffs that keep foreign ethanol out.

Every president since Carter has been behind this kind of favoritism for ADM, as a result of which “about 43 percent of ADM’s profits came from subsidized products. In the 1990s it surfaced that ADM had become the number one recipient of corporate welfare.” Clinton (who, fittingly, hitched a ride with Andreas in his corporate plane to attend Nixon’s funeral, and took a $10,000 contribution from Andreas during the height of ADM’s price-fixing scandal) joined forces with Newt Gringrich to protect the ethanol tax exemption and mandated ethanol’s use in order to “protect our environment, our public health, and our farmers.” This rationale went against findings by the Energy Department, the Congressional Budget Office, and the National Academy of Sciences, all of which agreed that ethanol actually hurt the environment and increased pollution.

In reconstructing these crimes, Lieber got little assistance from the principals. “Famous for shaping its own message and putting off all but the most servile reporters, ADM was no help,” he writes. “The Department of Justice seemed highly conflicted. On one hand, it divulged a deluge of mainly innocuous documents. On the other, it stood and continues to stand on secrecy to restrict access to matters of public concern.” One part of the government seemed to want ADM to get the punishment it deserved, he says, but another part “sought to protect ADM and do its bidding.”

“Whether the final results favor whistleblowers or wrongdoers, deter or tolerate price-fixing, and ultimately enhance or mock the law, are hard questions that remain for the reader.”

Nonsense. Anyone who reads this book will find them very easy questions to answer.

Former Observer editor and long-time contributor Robert Sherrill writes about corporate crime for The Nation. He spends his time in Texas and Florida.