Professionalism/Mark Whitacre and Archer Daniels Midland
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- 1 Introduction
- 2 Mark Whitacre
- 3 The Archer Daniels Midland Corporation
- 4 The Lysine Price Fixing Conspiracy
- 5 Ethical Pitfalls
- 6 References
Imagine you are in a boardroom, sitting at the head of the table. Outside the room, you can see the loyal employees of a division which you lead, in a successful and global company. Your family depends on your income, and you love your job. The CEO enters the boardroom, sits down, and hands you a business plan which eliminates the need to drive prices down—in fact, it increases your divisions profits significantly. You are no lawyer, but you get a feeling that the practices are questionable.
What do you do?
Mark Edward Whitacre was born in Ohio in 1957. He lived in a small town north of Cincinnati called Morrow. He went to Lille Miami High School where he was the 1975 class president. Whitacre attended Ohio State University for his B.S. and M.S. degrees with distinction in Animal Nutrition He went on to Cornell University in Ithaca, New York where he earned his PhD in Nutritional Biochemistry in 1983. He also earned two law degrees, including his Juris Doctor from Northwestern California University School of Law. Whitake's wife Ginger, his high school sweetheart, is an elementary school teacher.
Whitarce went to Degussa and Ralston Purina as an executive before he was hired at the age of 32 (1989) by Archer Daniels Midland's BioProducts Division, where he was president from 1989 to 1995. He was the youngest divisional president in ADM in the history. By 1992 (age 35), Whitacre was a Corporate Vice President.
Whitare left ADM in 1995, and became the CEO Future Health Technologies (FHT), a startup medical company later renamed Biomar International. He left Biomar and was imprisoned in 1998, until December 2006, having plead guilty to fraud. He currently serves as the President of Operations and Chief Operating Officer (COO) of Cypress Systems, Inc, a biotechnology company located in Fresno, California.
The Archer Daniels Midland Corporation
Archer Daniels Midland (NYSE: ADM), based in Decatur, Illinois, is an international, agricultural company with primary business segments in oilseed processing, corn processing and agricultural services. The company was named World’s Most Admired Food Production Company for three consecutive years by Fortune magazine from 2009. ADM currently employs about 30,000 people in 265 processing plants and over 330 sourcing facilities.
The company was founded in 1902 when George A. Archer and John W. Daniels began a linseed crushing business, and expanded when they acquired Midland Linseed Products company in 1923. It continued to grow in the 1940s-1960s, majorly by expanding its business to other agricultural projects such as isolated soy protein. In late 1960s, ADM started to expand its business globally by exporting and acquiring plants and companies in other countries. In 1971, Dwayne Andreas was named the CEO of ADM, transforming the company into a large-scale international “industrial powerhouse”. By 2010, ADM was named the "Most Admired" food production company by Fortune magazine.
Company cultures and criticisms faced
ADM is widely criticized for several practices, including tax evasion, environmental and product safety, human rights, and lack of social responsibility, in addition to its anti-competitive behaviors and lack of consumer protection. Nevertheless, the 1996 price-fixing scandal was the most publicized event the company was involved in.
The criticism of the labor use and human rights violations of the company includes continuous and willful violations of the safety and health laws, including the requirement to use retrieval lifelines for workers entering confined spaces and to inform emergency services providers of workplace hazards. The Occupational Safety and Health Administration fined the company $690,500 in 1996 for inadequate space procedures and $650,000 in 2000 for safety and health violations at a rail car repair facility. ADM went on to accrue over 29 serious work safety standards violations between 2001 and 2009.
ADM is ranked as a top industrial polluter in the United States. Processing corn-based ethanol results in "the huge, monstrous costs of cleaning up polluted water in the Mississippi River drainage basin and also trying to remedy the negative effects of poisoning the Gulf of Mexico."  In addition, soybean farming is one of the leading causes of deforestation in the Amazon. ADM, along with Cargill and Bunge, control about 80% of the European Union’s soybean processing. ADM paid a $1.46 million fine for air pollution in Illinois with $1.6 million to reduce air pollution in 2001, and another $340 million in 2003. In 2006, ADM agreed to stop purchasing soy from newly deforested areas, although this has no legal consequence.
Dwayne Andreas and Political Influence
Dwayne Andreas, one of the top contributing political donors in history, seems to be the onset of the pattern of semi-illegal and certainly unethical dealings for Archer Daniels Midland. Early in his career, while working at grain-processing company Cargill Inc, he corroborated with Soviet head of Agriculture Mikhail Gorbachev concerning vegetable oil sales, against his company's wishes. After resigning from Cargill, he had a close friendship with former vice president and presidential candidate Hubert Humphrey. He became CEO of ADM in 1972, and remained so through 1998.
During the Watergate investigations, Andreas was charged with (but acquitted of) illegally contributing $100,000 to Humphrey's 1968 presidential campaign. In 1972 Andreas also unlawfully contributed $25,000 to President Nixon's re-election campaign via Watergate burglar Bernard Barker. According to Mother Jones Magazine, "Andreas gave more than $1.4 million in soft money and $345,000 to individual candidates, using multiple donors in his company and family members (including wife Inez) to circumvent contribution limits."
Andreas's donations allowed him to lobby politicians for government support on tax breaks that favored the company through federal commodity policies. As a result, the taxes the company paid (28.8%) were lower than the statutory rate for corporations (35%). A report from the Cato Institute suggested that Andreas persuaded President Carter in 1978 to pass the Energy Tax Act, which exempted gasohol from the 4 cents per gallon federal excise tax, in addition to a stiff tariff against Brazilian ethanol and $340 million support in loans for new ethanol plants. This tax exemption has remained as of May 2012 and is expected to continue until 2015. The total government support for ethanol added up to $5.8-$7.0 billion in 2006 with ADM controlling at least one third of the ethanol market. Similarly, a tax on sugar increased manufacturers usage of high fructose corn syrup as a sweetener—an ADM product.
Price-fixing history of the company
|1965||Bakery flour||ADM and 11 other firms were fined for price-fixing in the bakery flour market|
|1976||Grains||ADM was charged with false grading and short-weighting exported grains, though it pleaded no context|
|1978||Food for Peace program||ADM and 2 other firms were sued for conspiring to fix prices in the Food for Peace program|
|1981||High fructose corn syrup||ADM was accused for controlling the price in the high fructose corn syrup market; dismissed in 1991|
|1994||Liquid carbon dioxide||ADM paid a total of US$1.48 million to dismiss a charge relating to price-fixing and market allocation in the carbon dioxide business|
|2001||Sodium gluconate||ADM and 5 other firms were fined US$52 million for running a price-fixing cartel from 1987 to 1995|
The Lysine Price Fixing Conspiracy
The Federal Bureau of Investigation began investigating ADM for a suspected case of corporate espionage, and ended up uncovering a price-fixing scheme between five international companies, involving controlling the cost of the grain amino acid lysine, which aids in the growth of certain livestock. Mark Whitacre served as the internal informant for the FBI, helping to bring down the conspiracy through anti-trust lawsuits. During 1992-1995, he wore a wire and made more than 100 tapes and recordings of international meetings regarding price fixing. In an interview for American Life, Whitacre said "The customer is our enemy and the competitor is our friend. And I heard that hundreds of times. That should be the slogan, not "Supermarket to the World.".
His information and recorded conversations finally caused ADM to incur federal charges of more than $100 million, as well as huge amounts of money as compensation to customers and plaintiffs. Dwayne and Mick Andreas, the leaders of the scheme, served three years in prison. At the same time, Whitacre told FBI agents that he participated in corporate kickbacks and money laundering in ADM. This caused him to lose his immunity, and he was charged with embezzling $9 million. In 1998, Whitacre received a ten and a half year sentence for wire fraud, tax fraud, and money laundering. He was released after eight and half years, on December 21, 2006, for his good behavior.
It has been made publicly known that Whitacre suffered from and was diagnosed with Bipolar disorder during the time he worked for the FBI. This brings to light the possibility that his psychological instability contributed to his embezzlement crimes and, and makes the harshness of his sentence (three times the prison stay of his price-fixing co-workers) questionable.
Mark Whitacre’s case has been featured in several books inlucding The Informant, Rats in the Grain, and Mark Whitacre Against all Odds. His story is also filmed in The Informant (2009). Matt Damon starred as Whitacre in the movie.
In order to facilitate fair competition in the US capitalistic economy, the federal government enacted the United States Anti-Trust laws in 1992, which outlaws monopolistic practices. Competition is what drives products and services to the market, their prices down, and their quality up. Competition allows innovation to be rewarded, and society to continually improve. By agreeing to fix prices with its competitors, Archer Daniels Midland eliminated the competition in the market—if they all charged $1 for a carton of milk, customers had to buy it for $1. If they all raised prices to $1.50, customers had no choice but to pay. By fixing the prices of its food additives, ADM eliminated the need for competitive pice margins and swindled the American people out of hundreds of millions of dollars. According to Dwayne Andreas, "When it comes to agriculture there is no such thing as a free market." 
Mark Whitacre was faced with an ethical dilemma in that he was forced to decide between two undesirable situations—the first being continuing to comply with the illegal practices of ADM, and the second being exposing the company's practices. Although this was legally the right thing, it destroyed his sense of loyalty to his superiors Dwayne and Mick Andreas and eventually caused him to lose his job and personal livelihood. Professional ethics involves a series of loyalties—to a moral code, the law, a person, a trade, or an organization, for example. Mark Whitacre could not remain loyal to the law, his personal moral code, his boss, and the company, once the company deviated from the law and morality.
Whitacre's reasons for going to the FBI regarding ADM's lysine price fixing are unclear—it is indicated that his wife, Ginger, threatened to tell the FBI if Mark did not. This leaves the question as to whether it was Mark's morality, or just the fact that his proverbial ring of gyges had been removed, that caused him to become the three year FBI informant.
- "Former ADM Executive Pleads Guilty to Fraud" (Press release). United States Department of Justice. 1997-10-10. Retrieved 2009-09-20.
- Archer Daniels Midland: History, Retrieved at http://www.adm.com/en-US/company/history/Pages/default.aspx
- Eichenwald, Kurt. "The Informant." Random House Publications.
- Current Biography, 1985. New York: The H. W. Wilson Co.. 1985.
- THE FIX IS IN TRANSCRIPT. Originally aired 09.15.2000. This American Life.
- Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 173. ISBN 0-13-063085-3
- Wilson, John. "Price Fixer to the World." Bank Rate. Accessed at http://www.bankrate.com/brm/news/investing/20001221c.asp
- Muirhead, Sarah (2008-06-02). "Whitacre paid ultimate price". Feedstuffs Magazine 80 (22): 1, 42–43.