White-Collar Crime - The Company Robbing The Consumer

Throughout most of the early 1990s, nine corporations colluded to fix the price of and to control an estimated $1 billion market for lysine, a widely used additive for animal feed. In September 1998 three former executives of the Archer Daniels Midland Corporation (ADM) were found guilty of having secretly met with other lysine producers to divide up marketing territories and establish prices.

Scott R. Lassar, the United States Attorney in Chicago, characterized the case as "one of the hardest-fought trials that I have ever been involved in, in terms of the firepower brought in by both sides." The case involved Michael D. Andreas, the son of ADM's owner and the one-time heir apparent to the $9.2 billion, privately owned food industry giant. In 1999 Andreas and Terrance S. Wilson were each sentenced to two years in jail and each ordered to pay a $350,000 fine. This could have been more, since the government is legally allowed to seek twice the amount gained in the crime or lost by the victims. The prosecutors asked for $25 million from Andreas; the judge set the lower fine amount instead. In September 2000 the sentences of Andreas and Wilson were changed from two years to three years and from two years to nine months, respectively. Appeals brought by the two men were rejected by the U.S. Supreme Court in November 2000. Marc Whitacre, the other executive charged, was given immunity for his help taping conversations for the FBI, but later had it revoked after it was discovered that he also embezzled $9 million from the company. He was given a nine-year sentence, which had 20 months added to it in 1999.

The U.S. government's investigation of the food and feed additive industries resulted in eight criminal cases against nine corporations. Virtually all the companies pled guilty and paid almost $200 million in fines. In 1996 ADM agreed to pay $100 million in fines. In that deal, ADM was granted immunity against charges of price-fixing in the sale of high-fructose corn syrup, a major ADM product, if it cooperated with the federal government in its investigation of the industry.

Because prices for lysine were fixed, the animal feed bought by poultry and animal producers cost more than if there had been a free market in lysine. The food producers then passed this increased price on to consumers. Some estimated the cost of the price-fixing to the nation's consumers as high as $170 million. Although ADM and the other companies paid fines, and the convicted ADM executives were likely also to pay fines, none of this loss will likely ever be directly recovered by an individual consumer.