Two Books About the ADM Price-Fixing Conspiracy Reviewed by AAI Food Industries Committee member John Connor in FTC:WATCH

Dec 06 2000
Commentaries

FTC:WATCH #556

Kurt Eichenwald. The Informant: A True Story; New York: Broadway Books (2000).  No index. $26.

James Lieber. Rats in the Grain: The Dirty Tricks and Trials of Archer Daniels Midland; New York: Four Walls Eight Windows (2000). Indexed. $26.

by John M. Connor Purdue University

   A popular book on antitrust will strike many as a classic oxymoron. Two in one year and both selling well is surely a Shermanian phenomenon.

   New York Times Senior Write Kurt Eichenwald has crafted a 606-page narrative of a global price-fixing scheme that, slimmed down to one-tenth its heft, has a good good chance of coming to your neighborhood theater soon.  Eichenwald reduces a story of seamy corporate conspiracy that began in 1992 (and is still unwinding in foreign courts of law) to a federal-cops-and-robbers tale, told from the perspective of the feds.

   Eichenwald has great material to work with.  He has well dressed thieves for whom stealing from their customers was about as serious as rigging a frat-house election, one of the world's greatest agribusiness companies located in a sleepy Corn Belt town providing a surface of rectitude below which bubbled veins of corruption, and a brilliant mad scientist who volunteers to become the greatest white-collar mole the FBI has ever had and then uses the FBI as a cover to defraud the very company he is spying upon.  Nearly all this twisted tale is captured on hundreds of video and audio tapes handed over to the FBI and made available to Eichenwald and his three research assistants.  The Informant also incorporates ". . . about eight hundred hours of interviews with more than one hundred participants . . . as well as tens of thousands of confidential corporate and government records, including secret grant jury testimony" (author's note).

   Eichenwald worked for five years on this book.  He narrates events from November 1992, when the FBI investigation of Archer Daniels Midland began, to February 1997, when the informant Mark Whitacre was convicted by the U.S. Department of Justice for embezzlement of ADM.  A brief epilog sketches the dramatic 1998 Chicago trial that convicted Whitacre and his former colleague Michael Andreas for criminal price fixing and the January 1999 downfall of the powerful Chairman of ADM, Dwayne Andreas, father of Michael.

   In a style that seems at times borrowed from a John Grisham novel, pages of pure dialog -- some of it reconstructed -- fill most chapters.  A single page may jump across three or four scenes pulled from as many days.  Perhaps this approach is inevitable in a book that is an extremely visual rendering of the actions of 86 "main characters," as Eichenwald calls them.  To prove that he is the proverbial fly on the wall, the author strews the work with such details as the wallpapers of countless meeting rooms.  The whole approach creates the breathless immediacy of a challenging mystery novel and sweetens an otherwise tart tale of corporate crime.

   I doubt that a nonfiction book has been written since the 1930s that makes the FBI look so Olympian.  Telling the story from the FBI's angle solves a big dramatic problem for anyone who would write about this scandal.  For the first three years, the episode looks like the good guys (Whitacre and the FBI) versus the bad guys (ADM's profit-mad top executives in cahoots with an Asian tong), but then the tale melts into the good guys versus the nutty guy (Whitacre).  Black and white is easy, but gray is death to a colorful novel, unless your name is John Le Carre.

   Lest I leave the impression that Eichenwald hankers after the life of a Hollywood writer, it should be noted that even the most assiduous reader of press reports on the ADM affair will be rewarded with novel information.  Eichenwald followed up on Whitacre's charges that ADM tolerated embezzlement as a type of tax-free fringe benefit for its top executives by nailing down the story of how ADM's treasurer had defrauded the company of $14 million in 1991 and how ADM blocked attempts by the FBI to investigate the crime.  The treasurer was allowed to quietly retire.  Moreover, Eichenwald manages to get Whitacre finally to admit on the record that his embezzlement was not a company-sanctioned bonus scheme.  He also turned up facts about ADM's overly generous treatment of one manager it fired for refusing to fix prices.

   Eichenwald also has a lot of good material on the secret bargaining that went on between ADM's law firm, Williams & Connolly, and the DOJ that resulted in ADM's breathtaking $100-million price-fixing fine.  The haggling was not without its moments of humor.  Williams & Connolly actually proposed that ADM's Board of Directors sue the government for damages because Whitacre's cooperation agreement prevented the informant from telling his bosses at ADM about the price-fixing.  Of course, nearly all of Whitacre's supervisors at ADM were themselves conspirators.

   James Lieber is more comfortable with gray.  As a practicing lawyer with a strong track record as a writer of popular works about major business developments, he makes a convincing case that ". . . bloodless white-collar crimes say more about the way the world works. . ." than the gruesome crimes covered by tabloids and Court TV.

   Rats in the Grain seems like a needlessly provocative title for a serious book about one of the most egregious corporate crimes of the late 20th century.  Yet, this book does a good job of characterizing the Archer Daniels Midland Company as a sort of ever-full granary undermined from within by top executives constantly nibbling at the shareholders' grain.  What the shareholders did not know was that the granary was being replenished by short-changing the grain terminal down the road.

   Rats covers most of the ground omitted by The Informant.  Lieber tries to give the readers some of the background necessary to understand the import of the Chicago trial of three ADM executives who colluded on the price of lysine, a feed ingredient made by ADM and four other companies in the world that accelerates the growth of hogs and poultry.  The book covers ADM's notable success in the agribusiness sectors; the key role played by its aging patriarch, Dwayne Andreas, a genius in both management strategy and political machination; and a smattering of what the antitrust laws are all about.

   The centerpiece of Rats in the Grain is the five-week Chicago trial, which Lieber attended faithfully.  Nearly half the text is given over to the "fire and iron" of the American legal system -- trial by jury.  Nearly every major witness has a chapter of his own, with insightful commentary by Lieber on courtroom strategy and tactics.  Lieber has 50 names in his Cast of Characters, and he needs almost all of them to narrate the tale.  As a non-lawyer who had previously read the 6000-page trial transcript, I was fascinated by insights that had escaped my reading, but I can sympathize with others who might find it tedious at times.  Although a well crafted rendition, its depth will be best appreciated by professionals or journalists who have covered such trials.

   Eichenwald makes little attempt to provide background, even on his protagonist Whitacre, and eschews the kind of summing-up that would help his readers make sense of it all or place it in historical context.  Lieber is better on this score.  His last three chapters valiantly try to draw implications of the events for Whitacre as a person, for the wounded ADM, and for antitrust enforcement.  Eichenwald reveals much about the folly of human behavior and the arrogance that flows from market power, but Leiber's work will stand as a longer lasting historical document of an antitrust trial the equal of Microsoft and certainly the most important price-fixing trial since the great electrical-equipment convictions in 1961.

   Although both books are praiseworthy and overlap very little, both leave many tantalizing topics for future writer.  Neither book addresses the business pressures that make price-fixing seem to be so profitable and worthy of risk.  Readers are left in the dark about ADM's simultaneous involvements in three to five other international cartels and how these related to the lysine case, nor does one learn much about ADM's partners in the lysine crime, four Asian manufacturers.  Finally, for quite understandable reasons, the role played by Dwayne Andreas himself in the conspiracy is little mentioned, nor are we enlightened about the highly likely lobbying of the White House by Andreas' friends.

   De gustibus non est disputandum, but my advice is to give both hemispheres of your brain a treat: The Informant to whet your appetite for excitement and Rats in Grain to satisfy your thirst for historical knowledge.

John M. Connor teaches economics at Purdue University. He has been involved in several antitrust cases that have alleged price-fixing in lysine and other agribusiness products made by ADM. His book, Global Price Fixing, is scheduled to be published in mid 2001.