Directors Call Archer-Daniels
Mum on Inquiry
Company's Shares Tumble 11% on
News Executive Was FBI Informant
SCOTT KILMAN & RICHARD GIBSON
Wall Street Journal 11jul1995
[More on Archer-Daniels-Midland]
Several directors of Archer-Daniels-Midland Co. said yesterday the company has left them standing largely in the dark about a burgeoning government criminal antitrust investigation.
Meanwhile, Archer-Daniels's stock fell 11% in heavy trading on news that a top company executive had been an informant for the Federal Bureau of Investigation in that inquiry.
Archer- Daniels has retained Aubrey M. Daniel II, an attorney with the firm Williams & Connolly in Washington, to conduct an outside-counsel investigation of the company, an Archer-Daniels director said. Williams & Connolly attorneys have in the past two weeks been interviewing Archer-Daniels employees around the world as part of the outside inquiry. Mr. Daniels declined to comment.
As reported yesterday in The Wall Street Journal, Mark E. Whitacre, the 38-year-old president of Archer-Daniels's BioProducts Division, helped the government clandestinely record conversations of several fellow executives, as well as meetings with competitors.
Archer-Daniels director Ray A. Goldberg, a Harvard University professor of agriculture and business, expressed surprise yesterday at learning of Whitacre's dual role and admitted he wasn't sure who the executive was. "I've not been told more than what I've read" in the newspapers, he said from his Cape Cod, MA, home. He said the company was "trying to piece together what information they're getting from the Justice Department."
Coming Board Meeting
Mr. Goldberg said he last talked with Archer-Daniels Chairman Dwayne Andreas last week and brought up the antitrust inquiry after calling him about another matter. He said the chairman told him there were "a lot of rumors and he couldn't confirm or deny any of them."
Mr. Goldberg said that what had been scheduled as a regular quarterly board meeting in Decatur, IL, where Archer-Daniels is based, next Wednesday "is becoming a very special meeting." He said the company thought about moving up the meeting because of events, but decided against that because "we felt the more information we had to deal with and the more factual background we had from all the sources, the better off the directors would be to make some meaningful judgments."
The federal government is investigating whether Archer-Daniels and some others have colluded on prices of products, including high-fructose corn syrup, a widely-used sweetener , and lysine, an amino acid that helps livestock put on weight. Nobody has been charged as a result of the investigation.
The FBI, which has amassed hundreds of video and tape recordings, has played some of them to several Archer-Daniels executives since federal agents, bearing subpoenas, visited company headquarters and the employees' homes on June 27.
In a further development, people close to the case said the FBI's playing of the tape recordings has prompted several lower-level Archer-Daniels executives to cooperate with the government.
Working with federal investigators, a federal grand jury in Chicago began hearing evidence concerning alleged price collusion by Archer-Daniels executives and managers.
While Mr. Whitacre remains an executive of the giant grain-processing company, Archer-Daniels confirmed yesterday that Howard G. Buffett, a director, a corporate vice president and assistant to Mr. Andreas, resigned. Associates have said Mr. Buffett, the 40-year-old son of multibillionaire investor Warren Buffett, quit the company because he was upset by the antitrust investigation, as well as how the company was handling it.
Another long-time director, H.D. "Joe" Hale, chairman of the company's ADM Milling Co. unit, also said he was unaware of recent events. He learned of Mr. Buffett's resignation from a reporter yesterday.
After a delayed stock opening yesterday on the New York Stock Exchange, Archer-Daniels stock dropped $1.875 a share to $15.875, with more than 22.9 million shares traded, or 4.4% of the company's 516.1 million shares.
Separately, Ajinomoto Inc. of Japan disclosed that the FBI on June 27 — the same day agents swarmed over Decatur — visited the Chicago offices of its Heartland Lysine unit. FBI agents met with Heartland President Hisao Shinohara and Vice President and Controller Dennis Mullane. The agenst were seeking documents, including customer lists and marketing studies, Mr. Mullane said.
"We are cooperating fully with then," he said, adding that the company was "quite surprised" by the government's interest. He declined to comment further. Heartland's plant is in Eddyville, Iowa.
Industry sources say Archer-Daniels's entry into the lysine business in 1989 with a price-slashing, market-grabbing strategy, hurt Heartland Lysine the most, because it was the market leader at the time. Since then, Archer-Daniels has grabbed the lion's share of the domestic lysine market and holds about half the world business for the vital feed additive. Today there are only four major producers of lysine world-wide: Archer-Daniels, Ajinomoto's unit, BioKyowa Inc., also of Japan, and Sewon Co., a South Korean concern.
BioKyowa's U.S. vice president, Michinobu Inoue, said the company recently was informed of the investigation and is "conducting a full examination of the situation. It is, of course, our intention to fully comply with all of our legal obligations." He declined to elaborate.
An official of R.F. Southerland Co., a St. Louis sales agent for Sewon in the U.S., said his company hasn't been contacted by authorities.
— Thomas M. Burton contributed to this article.